The U.S. auto industry is selling fewer cars, and one forecaster says this isn't a temporary dip—it's a structural collapse.
Tom Libby, an industry analyst with S&P Global Mobility, calls it a 'perfect storm' of demographic shifts, rising prices, and changing consumer habits. His forecast: by 2040, the U.S. auto market could be 20-30% smaller than today. That's millions of vehicles that won't be sold—and thousands of jobs that won't exist.
New car sales hit 17.3 million in 2016. Last year? 15.6 million. Libby thinks we'll see 12-13 million by 2040. Not because of a recession, but because the fundamentals have shifted.
The Demographics Are Crushing Us
Start with millennials. They're the largest generation in history, but they buy fewer cars per capita than their parents. Why? They're older when they get licenses, more likely to live in cities, and saddled with student debt. Gen Z looks the same.
Meanwhile, Baby Boomers are aging out. After 75, car ownership drops sharply. The U.S. population is greying fast—by 2040, one in five Americans will be 65 or older. That's a lot of license surrenders.
Immigration, which typically brings younger drivers, is also down. The net effect: fewer potential drivers, fewer car purchases.
Prices Are Out of Control
The average new car now costs over $48,000. That's up nearly 30% from five years ago. Wages haven't kept pace. So buyers hold onto their cars longer—the average age of a vehicle on U.S. roads is now 12.5 years.
Leasing, once a way to get people into new cars every three years, is fading. High interest rates make monthly payments painful. And with insurance premiums up 20% in the last year alone, the total cost of ownership is scaring people away.
'We've priced a huge chunk of the population out of the new car market,' says Libby. 'They're not delaying purchases—they're exiting the new car market permanently.'
Electric Vehicles Won't Save Us
EVs are the industry's great hope, but they're not a volume play. They last longer, require less maintenance, and have fewer moving parts. That means fewer replacement vehicles and fewer service visits.
Automakers love EV profit margins, but they need to sell fewer EVs to make the same money. That's a feature, not a bug. The industry is actively moving away from the old 'sell more, earn less' model.
What This Means for Workers
A smaller market means fewer assembly plants, fewer dealerships, and fewer parts suppliers. The U.S. auto industry employs roughly 1 million people directly. A 25% market contraction could eliminate 200,000 of those jobs.
Dealerships, which make their money on service and used cars, will consolidate. The tiny, family-run dealer is already a dying breed. Expect more mega-dealers and fewer small-town showrooms.
The Verdict
This is not a cyclical downturn. It's a permanent downsizing. The U.S. auto market is heading for a smaller, more exclusive future. Fewer people will buy new cars, and those who do will pay more. The rest will drive used cars, take Uber, or move closer to transit.
The question isn't whether the market will shrink—it's whether the industry can adapt fast enough. So far, the signals are mixed. But one thing is certain: the era of 17 million annual sales is over.
