The U.S. auto market is facing a perfect storm of challenges that could lead to a significantly smaller market by 2040. This is according to analysts at Bain & Company, who point to a combination of factors that are likely to drive sales down by more than 2 million units over the next two decades. These factors include falling birth rates, behavioral changes, high car prices, and a growing array of alternatives.
Mark Gottfredson, a partner at Bain & Company, describes this as a "perfect storm" that is being fueled by population declines and technological disruption. The auto industry has historically relied on an annual 1% growth rate that tracks the increase of the overall population, but this growth rate is slowing down globally, and some countries are already experiencing population declines.
The U.S. fertility rate in 2025 was about 1.6 births per woman, which is below the replacement rate of 2.1, according to the Centers for Disease Control. This is being offset by relatively high immigration, but Bain expects restrictive immigration policies to last for the next 15 years, which could cut historical net migration rates in half.
One of the most significant behavioral changes is the declining number of 16-year-olds with driver's licenses. Half of 16-year-olds today don't have a driver's license, compared with nearly 70% of 16-year-olds between 1966 and 1984. This could reflect a delay rather than a total refusal, but Bain's research suggests that most people still get licenses by age 25.
The share of new vehicle registrations among people aged 18 to 34 has also fallen 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 affordability of new vehicles is a significant factor in this shift. 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. This is making it more difficult for younger people to afford new cars, and they are more likely to use ride-sharing services like Uber or Lyft.
The introduction of robotaxis in the next 15 years could further reduce the number of licensed drivers and the number of vehicles per driver. Bain research suggests that the share of the licensed population could drop around 2 to 3 percentage points, and the number of vehicles per driver could drop from 1.2 to 1.1.
The auto industry will have to find a way to keep cars in service, even as vehicle prices remain high. Auto forecasters say that today's vehicles cannot have a limitation of five to 10 years, and it is not practical for a person who's spending $50,000 or $100,000 to have a car that becomes junk in less than a decade.
The U.S. auto market is likely to become more competitive as a result of these trends. Consumers already have a choice of about 450 nameplates in the country, and the market is likely to consolidate as automakers compete for a shrinking number of customers.
In conclusion, the U.S. auto market is facing a perfect storm of challenges that could lead to a significantly smaller market by 2040. The auto industry will have to adapt to these changes, and it is likely to become more competitive as a result.
