A customer speaks with a sales agent while standing between a Ford Motor Co. Everest sport utility vehicle (SUV), right, and a Mustang sports car on display at a Ford dealership in Shanghai, China, on Thursday, July 19, 2018. Oilai Shen | Bloomberg | Getty Images

It is not a great time to sell cars in China. The world's largest car market is experiencing what some industry watchers say is its biggest slowdown in two decades. Foreign automakers, such as General Motors have so far been able to weather the storm, but others, such as Ford, have watched their business in the region deteriorate. China is the world's largest car market, with about 28 million vehicles expected to sell in 2018, according to IHS Markit. That is compared with about 17 million expected in the U.S., the world's second largest car market. Auto sales in China fell 14 percent in November over the same month in 2017, said the Chinese Association of Automobile Manufacturers. This has continued a general downward trend in the country that began in July, but the November declines are the worst so far this year.

The Chinese government has reportedly considered taking action to reverse course, and automakers are unrolling plans to revamp lineups and devote more attention to one of the last great growth opportunities in the world. "This is the first sustained downturn in memory," said Michael Dunne, CEO of ZoZoGo, a firm that advises automakers on doing business in China. "We would have to go back to the Asian financial crisis in 1998-1999 to see the last time China had flat or down sales for four months or more in a row." There are a few factors that have contributed to the slowdown in the region. One is a crackdown this year by the Chinese government in certain unconventional forms of lending, Dunne said. For several years China permitted a form of peer-to-peer lending that allowed wealthier Chinese to lend money directly to the less wealthy, without going through a traditional banking system. This form of peer-to-peer lending has made a lot of credit available to newly minted members of China's growing middle class, particularly in second- and third-tier cities, which are so named for their smaller size and smaller economies when compared with first-tier cities such as Beijing and Shanghai. This has made this demographic one of the fastest growing markets in China's automotive industry. But since the beginning of 2018, as many as 25 percent of the businesses facilitating this type of lending have been closed or shut down, Dunne said. That has put the remaining three quarters on notice, and stoked fears they may be the next to come under scrutiny. Everyone in that business has grown a lot more careful and the cash flows that were formerly so available to this important segment of buyers have dried up. There is some disagreement over just how influential peer-to-peer lending is in China as the auto market has matured. "In the new-car market, P2P is a relatively small financing method," to Jacob George, who is vice president and general manager of J.D. Power Asia Pacific. "It is only about 2.7 percent of the retail credit market. The captive auto financing companies are the biggest source of loans if the customer doesn't pay cash — which occurs about 40 percent of the time. Hence, we don't believe that this will have a major effect on the new-car market." They were a more significant and growing source of funds in the used car market, until 2018, George said, but tighter regulations have likely shrunk the market. The reason for the discrepancy could be that when consumers secure loans through informal or unlicensed channels, they either take the money to a dealership and pay cash for a vehicle, or take the money to a bank and secure a loan, Dunne said. Thus when surveyed, consumers might be saying they are using loans from banks rather than unlicensed channels.