A 'perfect storm' points to a much smaller U.S. auto market by 2040

Ten years ago, a record 17.6 million cars, trucks and SUVs were sold in the U.S. Some forecasts say the country might not come close to that number again.

Analysts at consulting firm Bain & Company said several signs indicate the market is about to shrink even more. Falling birth rates, behavioral changes, high car prices and a growing array of alternatives could drive sales down by more than 2 million units by 2040, according to their analysis.

These indications point to a future where automakers fiercely compete for a shrinking number of customers, said Mark Gottfredson, a partner at Bain & Company.

The auto industry has historically depended on an annual 1% growth rate that tracks the increase of the overall population, Gottfredson said. But all over the world, government statistics show population growth has slowed, and some countries are already seeing declines.

"It is the perfect storm, isn't it," Gottfredson said. "It starts with the population declines. You're no longer a growth industry. You're a declining industry. You're a declining industry at a time when the technology is disrupting everything."

The U.S. fertility rate in 2025 was about 1.6 births per woman. While not as low as some countries in Europe or Asia, it's considered below the replacement rate of 2.1, according to the Centers for Disease Control.

Bain said that has been offset by relatively high immigration — about a million people coming to the U.S., according to the historical average it cited. But the firm said it expects restrictive immigration policies will last for the next 15 years, cutting historical net migration rates of the past 20 years in half, which means it could again reach low levels seen in 2019.

That remaining population's behavior has changed — in part due to high prices and affordable alternatives, according to Bain. Half of 16-year-olds today don't have a driver's license, compared with nearly 70% of 16-year-olds between the years of 1966 and 1984, Gottfredson said. The stat might reflect a mere delay rather than a total refusal — Bain's research suggests most people still get licenses by age 25.

Still, the share of new vehicle registrations among people aged 18 to 34 fell from 12% in the first quarter of 2021 to under 10% by mid-2025, according to S&P Global Mobility. Buyers 55 and older account for nearly half of all new registrations and have held the largest share for eight straight quarters, the firm said.

"The engine behind it is affordability," said Craig Daitch, founder and president of Telemetry, a firm that does market research for the auto industry. New vehicle monthly payments are up 30% over four years, and nearly one in five new vehicles now carries a payment over $1,000 a month, he added.

AutoForecast Solutions, a forecasting firm, expects U.S. new car sales to stay relatively flat at around 16 million through 2033, the furthest year in the future for which the company issues estimates.

"When you look into the future, younger people are more likely to use Uber or Lyft when they're going somewhere," Sam Fiorani, vice president of global vehicle forecasting for the company. "We're still seeing groups of young people who enjoy driving and want a new car, but fewer can afford it."

If robotaxis become widely available and affordable in the next 15 years, the share of the licensed population could drop around 2 to 3 percentage points, to 85%, according to Bain research. The number of vehicles per driver could drop from 1.2 to 1.1, which would be equivalent to 10% to 20% of U.S. households shedding one vehicle.

The projections Gottfredson shared with CNBC are revisions. He had earlier targeted 2030 as the year when volumes would dip below 14 million, but said he changed those assumptions because autonomous vehicles are taking longer than expected to arrive.

The population numbers though, are baked in.

"We already know how many people have been born and how many people will be of vehicle driving age at age 16 in 16 years from now. And so we can say with quite a bit of certainty that when we get to 2040, we're going to see we're going to see some decline in the U.S. That decline is even worse in places like Europe and in places like most of the countries in Asia."

Gottfredson said the most direct indicator of a potential of a future decline is the rate at which vehicles are "deregistered," which is when they're taken off the road and either scrapped or exported to another market, as happens with used vehicles.

In 2000, the rate of deregistration was about 6%, according to the Bain report. As of 2025, the rate was about 5%. Gottfredson said that rate could fall to 4.4% by 2040. This is primarily because vehicles are lasting longer — hitting a record 12.8 years on the road in 2025, according to S&P Global Mobility.

This could reverse. The longevity of electric vehicle batteries is still uncertain. It is also unclear how long automakers will be willing or able to update the software that is increasingly vital to new cars.

However, auto forecasters say that with vehicle prices as high as they are, the industry will have to find a way to keep cars in service.

"Today's vehicles can't have a limitation of five to 10 years," Fiorani said. "It's not practical for a person who's spending $50,000 or $100,000 that it's going to be junk in less than a decade."

Should these trends hold, the auto industry in the U.S. is liable to become ever more competitive. Consumers have their choice of about 450 nameplates in the country already.

"The competition in the U.S. is going to be ferocious," Gottfredson said. "There's too many automakers and too many brands competing for the consumers. The market is going to have to consolidate."