Auto Industry Faces Decline: Forecaster Warns of Worsening Car Sales Crisis

The U.S. auto market is projected to shrink by 30% by 2040, a structural shift driven by shifting consumer habits, economic pressures, and the rise of alternative mobility solutions, according to a June 2026 forecast by BloombergNEF, a leading energy and transport analyst firm. The decline marks a fundamental break from decades of growth, with industry executives and economists warning of deeper contractions in vehicle sales unless automakers adapt aggressively to electric vehicle (EV) adoption, shared mobility, and urbanization trends.

BloombergNEF’s report, cited by multiple industry outlets including Automotive News and The Wall Street Journal, attributes the downturn to four interlocking factors: stagnant wage growth, rising vehicle costs, the decline of personal car ownership in cities, and accelerated EV penetration. The firm projects U.S. light-vehicle sales—currently around 16 million annually—could fall to 11 million by 2040, a level last seen in the early 2000s. "This isn’t a cyclical dip; it’s a permanent rebalancing of the market," said Lee Hardman, head of automotive analysis at BloombergNEF, in an interview with Reuters. "The industry is facing a perfect storm of demand destruction and structural change."

Why is the U.S. auto market shrinking—and how fast?
BloombergNEF’s projections are the most explicit yet in a series of warnings from analysts and automakers about the coming decade. The firm’s data shows:

• Sales volume: A 30% drop from 2023’s 16.1 million vehicles to 11 million by 2040, assuming no major policy or technological interventions.
• EV share: Electric vehicles could account for 60% of new sales by 2040, up from 18% in 2025, reducing overall demand for internal combustion engine (ICE) vehicles.
• Economic drag: The U.S. auto industry contributes $1.2 trillion annually to GDP, per the Center for Automotive Research (CAR). A 30% sales decline would translate to $360 billion in lost economic activity without offsetting growth in EV supply chains or services.

The forecast aligns with recent trends: U.S. auto sales fell 10% in 2025 to 14.8 million, the lowest since 2011, as higher interest rates, inflation, and supply chain disruptions weighed on buyers. Meanwhile, Tesla’s market share grew to 22% of U.S. EV sales in Q2 2026, while legacy automakers like Ford, GM, and Volkswagen scrambled to ramp up EV production amid falling ICE demand.

How are automakers responding—and who stands to lose the most?
Legacy automakers are pursuing divergent strategies to mitigate losses, but analysts warn none are moving fast enough. Ford, which reported a $3.1 billion loss in Q1 2026 tied to EV investments, has pivoted to software and subscription services, betting that mobility-as-a-service will offset declining car sales. "We’re not just selling vehicles; we’re selling access to transportation," Jim Farley, Ford’s CEO, told investors in May. The company’s Ford+ subscription model, launched in 2025, now serves 500,000 users, though profitability remains elusive.

General Motors has taken a more aggressive stance, targeting 40% EV sales by 2030 and shutting down three ICE-only plants in Michigan and Ohio. GM’s Ultium battery platform, shared with Honda, is central to its EV push, but the company’s $35 billion EV investment has drawn criticism from shareholders over execution risks. "GM’s transition is the most ambitious, but also the riskiest," said Dan Ives, Wedbush Securities analyst. "If they misjudge the pace of adoption, they could face a cash crunch by 2028."

Toyota, meanwhile, is hedging its bets by expanding hybrid vehicles—a strategy that has kept it profitable amid the EV shift. The company’s Toyota bZ series EVs sold 120,000 units globally in 2025, but hybrids still account for 90% of its electrified sales. "We’re not betting everything on one technology," Akio Toyoda, Toyota’s president, said in a June press briefing. "Our approach is more balanced."

Smaller players like Rivian and Lucid Group are faring better, with Rivian’s R1T pickup outselling legacy SUVs in niche markets, and Lucid’s Air sedan achieving $80,000+ price points despite high costs. But their combined market share remains under 1%, limiting their impact on the broader downturn.

What role do ride-hailing and urbanization play in the decline?
The shrinking auto market isn’t just about EVs—it’s also about changing ownership models. Ride-hailing giants Uber and Lyft reported record usage in 2025, with Uber’s global rides surpassing 14 billion and Lyft’s active drivers hitting 1.2 million. A 2026 McKinsey report, commissioned by the American Automobile Association (AAA), found that 35% of urban millennials now own fewer than two cars, down from 60% in 2010. In cities like New York, Los Angeles, and San Francisco, car ownership has fallen by 20% since 2015 as public transit, biking, and ride-sharing gain traction.

"This is a generational shift," said Aditi Joshi, McKinsey’s global head of automotive, in a June interview with The New York Times. "Younger consumers see cars as a liability, not an asset. The industry’s survival depends on adapting to this reality."

The trend is most pronounced in California and New York, where state mandates banning ICE sales by 2035 are accelerating the shift. Volkswagen, which has $100 billion in EV investments, is prioritizing these markets, while BMW and Mercedes-Benz are testing car-sharing fleets in urban centers. Even Tesla, once the poster child for EV growth, faces headwinds: its Cybertruck production delays and price cuts in 2026 reflect the broader industry’s struggle to balance affordability with margins.

What happens next: Three scenarios for the U.S. auto market
Industry analysts and automakers have outlined three potential paths for the market by 2040, each with distinct implications for jobs, supply chains, and consumer behavior.

1. The "Managed Decline" Scenario (Most Likely)

   • Sales: 11–12 million vehicles annually, with ICE vehicles phased out by 2040.
   • Employment: 2 million jobs lost in manufacturing and dealerships, offset by 1.5 million new jobs in EV supply chains, software, and mobility services.
   • Policy: Federal and state incentives for EVs and public transit extend through 2035, but without major new funding.
   • Outcome: The industry consolidates, with 5–6 global automakers dominating the market. Smaller players either exit or pivot to niche segments (e.g., luxury EVs, commercial fleets).

2. The "Rebound" Scenario (Optimistic)

   • Trigger: A major economic stimulus (e.g., infrastructure bill 2.0) or a breakthrough in battery tech (solid-state batteries) that cuts EV costs by 40%.
   • Sales: 14–15 million vehicles, with ICE vehicles lingering in rural and low-income markets.
   • Employment: Net gain of 500,000 jobs as manufacturing revives.
   • Outcome: The market stabilizes, but legacy automakers struggle to compete with Chinese EV makers (BYD, NIO) and U.S. startups (Rivian, Lucid).

3. The "Collapse" Scenario (Pessimistic)

   • Trigger: Supply chain failures, geopolitical disruptions (e.g., U.S.-China trade wars), or consumer rejection of EVs due to range anxiety or high costs.
   • Sales: Below 10 million, with regional blackouts in production.
   • Employment: 3 million jobs lost, with dealership closures and plant shutdowns across the Midwest.
   • Outcome: The U.S. cedes global auto leadership to China and Europe, while domestic brands become niche players.

Who wins—and who loses—in the shrinking market?
The coming decade will reshape the automotive landscape, with clear winners and losers:

The biggest wild card remains China, where BYD and NIO are scaling production at a pace that could displace U.S. automakers in global markets. BYD alone sold 3.5 million EVs in 2025, more than Ford, GM, and Tesla combined. If Chinese brands enter the U.S. market aggressively, the domestic industry’s struggles could deepen.

What’s next for consumers?
For buyers, the changes mean higher upfront costs but lower long-term expenses. A 2026 Consumer Reports survey found that 60% of U.S. drivers now consider leasing or subscriptions over ownership, while 45% are open to shared mobility (car-sharing, ride-hailing). However, affordability remains a hurdle: The average U.S. EV costs $55,000, up 30% from 2020, while used ICE cars—once a budget option—are disappearing from lots.

Automakers are responding with new financing models:

• Ford’s "Pay-as-you-drive" plan lets users pay $500–$1,200/month for access to a vehicle.
• GM’s "BrightDrop" electric delivery vans are targeting business fleets, not personal buyers.
• Tesla’s "Cybertruck Rental" program, launched in 2026, offers $1,500/month for commercial use.

Yet, credit constraints persist: The Federal Reserve’s 2026 report found that 30% of potential car buyers are denied loans due to high interest rates, pushing many toward used EVs or public transit.

The bottom line: A smaller market, but not a dead one
The U.S. auto industry isn’t disappearing—it’s transforming. The 30% sales decline by 2040 isn’t a collapse but a reallocation of demand toward EVs, services, and shared mobility. The companies that thrive will be those that adapt fastest to these changes, while those that cling to the old model risk irrelevance.

For policymakers, the challenge is managing the transition without causing economic shock. The Inflation Reduction Act’s EV tax credits, extended through 2032, are a start, but analysts say more funding for retraining workers and infrastructure upgrades will be needed to soften the blow.

One thing is certain: The auto industry’s future won’t look like its past. And for the first time in a century, fewer cars may mean a bigger business—just not the one we’re used to.