As reported by CNBC, a new analysis from Bain & Company paints a picture of a contraction in the U.S. car market between now and 2024 as market forces make the auto business uncomfortably competitive.
Ben cites reduced immigration as one reason, as well as declining fertility – in other words, fewer people to buy cars to begin with. The auto industry has matured amid expectations of 1% population growth per year and population growth is now nearly stable, the report said. But Benn says there is also an issue of changing “behaviour” among transport consumers. Oh, and Ben also admits that cars are too expensive for a lot of people now.
A separate forecasting firm called AutoForecast Solutions told CNBC it expected flat sales for the next seven years, and told that publication, “When you look into the future, younger people are more likely to use Uber or Lyft when going somewhere.” If it’s meant to be a guess about the future, that may itself be a speculative notion, as inflation is hitting ride-hailing apps, and riders are cutting corners to save money.
Yet, Ben points out that today, only about half of 16-year-olds have a driver’s license, compared to 70% from 1966 to 1984. However Ben also says that “most people” get their license by the age of 25.
A Wall Street Journal report last month included estimates from Ford, GM, Toyota and other automakers and concluded that a wave of nearly one million new car buyers has disappeared from the U.S. economy, probably never to return.
It has been widely reported that new cars in general are now astonishingly expensive. There is literally no new car in America that costs less than $20,000, and the average cost of a new car is around $50,000. As a result, according to Ben, monthly payments for new vehicles have increased by 30% in four years. Somehow, one-fifth of the monthly payments on a new vehicle exceed $1,000. If you can believe it, millions of people are paying for it.
And you might have noticed that the cars on the road are very old. The report states that in the year 2000, the annual rate at which cars underwent “deregistration” or were removed from the roads – mostly becoming junk – was 6%. In 2025 this number was 5% and by 2040 it could be 4.4%.
but if you Are When purchasing a new car, there’s a good chance you’re approaching retirement age. Bain reports that consumers over the age of 55 buy nearly half of new cars, and so automakers cater to their preferences. 18- to 34-year-olds accounted for 12% of new car registrations in 2021, and the number was less than 10% last year.
Bain partner Mark Gottfredson told CNBC that he believes the consequences will be for car companies themselves: “Competition in the U.S. is going to be fierce,” he told them, adding, “There are a lot of automakers and a lot of brands competing for consumers. The market is going to have to consolidate.”
There is no reason to think that nameplate consolidation will benefit consumers. We want small, normal cars like sedans at normal prices – which are rare to rare in America now. American automakers acknowledge and regret the shortage of small cars. But the markup that automakers extract relative to manufacturing costs doesn’t provide a path to profitability compared to hulking and more profitable SUVs.
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