The auto industry is shrinking as the world reaches 'peak car' - and it's dragging down the entire global economy

Rebecca Cook/Reuters

• The automotive industry is slowing faster than expected, and the shift brings massive economic threats.
• The sector represented 20% of GDP slowdown in 2018 and roughly 30% of the year's drop in global trade, according to the International Monetary Fund.
• Headwinds against automotive supply and demand are set to persist into 2020, as car saturation peaks in wealthier regions and sales in developing markets struggle to pick up the slack.
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The automotive industry is slowing faster than expected, and bringing massive economic threats with it.

The sector experienced a "sharp downturn" in production and sales through 2018, and projections call for a similar decline through this year, according to the International Monetary Fund. The IMF pegged the industry as a major factor in lagging industrial output, and said a prolonged contraction would directly affect the global economy.

People thought the lag in auto sales "would not last as long as it has," IMF chief economist Gita Gopinath told The Wall Street Journal, adding that barriers to the sector's recovery "seem more durable than we thought."

The auto sector represented 20% of 2018's slowdown in GDP and roughly 30% of the slowdown in global trade, according to the IMF's latest World Economic Outlook survey released this month. The declines come as certain markets reach maximum automobile saturation - also deemed "peak car" - and headwinds on automotive supply and demand threaten to pull the sector even lower.