Analysts at the consulting firm Bain & Company have pointed to several indicators suggesting that the US auto market is headed for further contraction.

According to their analysis, declining birth rates, changing behaviors, rising car prices, and the increasing availability of alternatives could all lead to a drop in sales of more than two million units by 2040.

Mark Gottfriedson, a partner at Bain & Company, said these indicators paint a picture of a future where automakers will face fierce competition for a shrinking customer base, according to a CNBC report.

Gottfriedson explained that the auto industry has historically relied on an annual growth rate of 1%, which aligns with the increase in the overall population. However, government statistics worldwide show a slowdown in population growth, and some countries are even experiencing population decline.

Demographic shift.

Gottfriedson added, "It's like a perfect storm, isn't it? It starts with a declining population; this industry is no longer growing, it's declining, and this contraction is happening at a time when technology is revolutionizing everything."

The fertility rate in the United States is approximately 1.6 children per woman. While this rate isn't as low as in some European or Asian countries, it's below the CDC's replacement rate of 2.1.

Bain & Company noted that this decline has been offset by relatively high immigration rates, with roughly one million people arriving in the United States, based on the historical average they cited. However, Bain predicted that if restrictive

immigration

policies continue for the next 15 years, the net historical immigration rates of the past 20 years will be halved, potentially returning to the low levels seen in 2019.

According to Bain, the behavior of this demographic has changed, partly due to rising prices and the availability of more affordable alternatives. Gottfriedson pointed out that half of all 16-year-olds today don't have a driver's license, compared to nearly 70% of the same age group between 1966 and 1984.

This statistic may simply reflect a delay in obtaining a driver's license, rather than a complete reluctance to do so. Bain's research indicates that most people eventually obtain one by age 25.

However

, the share of new vehicle registrations among 18- to 34-year-olds has fallen from 12% in the first quarter of 2021 to less than 10% by mid-2025, according to data from S&P Global Mobility.

The firm reported that buyers aged 55 and older account for nearly half of all new vehicle registrations and have maintained the largest market share for eight consecutive quarters.

Craig Deitch, founder and president of Telemetry, a market research firm specializing in the automotive sector, stated, "The driving force behind this is affordability." He added that monthly payments for new vehicles have increased by 30% over the past four years, and that nearly one in five new vehicles now requires a monthly payment exceeding $1,000.