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

At the same time, cars are in less demand among global consumers.

Rideshare services and car-sharing options are replacing personal vehicles in densely populated areas, the IMF said. Car saturation also poses an issue, as populations in developed markets are past their most popular car-buying years, according to WSJ.

Many consumers are also adopting a "wait-and-see attitude" regarding car purchases due to technology advancements and electric vehicle production ramping up around the world, according to the IMF survey.

As wealthier regions' car sales tumble, developing markets haven't picked up the slack as quickly as automakers hoped.

China's car market is slowing as cities grow saturated and tax incentives reach their expiration, the IMF said. Car sales in the country are down 12% over the past year.

India's consumers are even less interested, with sales dropping 14% over the same period.

Car purchases tend to rise in these markets as income increases, but the uptick hasn't happened "at the speed we thought," Gopinath said.

"The demand for durable goods like cars hasn't come about," she said.

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