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With the auto industry slowdown and the support of policy, can Uxin catch the opportunity to turn the tide?
On April 27th, Beijing time, China's largest used car e-commerce platform Uxin released a new quarterly financial report. Affected by the epidemic, the financial report of Uxin's used car comes late. Judging from its share performance, Uxin is basically in a downward trend in the first quarter, and the stock price has remained below $2 for most of the time. Judging from market sentiment, its investment situation is not optimistic.
According to the financial report, its performance is still not very eye-catching. Although it has achieved year-on-year growth in revenue, it is still at a loss, and it may still be difficult to turn losses into profit in the short term. After the financial report was released, its after-hour shares fell a lot.
Before the release of the new financial report, Uxin sold its B2B second-hand car online auction business to 58.com, at a loss of only $105 million in price. Is there any chance for Uxin, which focuses on global purchase business, to stand up? What crises does the newly released financial report reveal that Uxin is facing?
The overall performance of Uxin is not very good
According to the financial report, in the fourth quarter, the total game revenue was 466 million yuan, an increase of 61.2% year-on-year; its 2C global purchase transaction reached 28,000, an increase of 26.5% year-on-year, a record quarterly record high; 2C transaction revenue was 388 million yuan, a year-on-year increase of 64.6%; gross profit was 276 million yuan, an increase of 108.8%.
In 2019, the 2C global purchase volume reached 97,000, an increase of 153.8% year-on-year; the total annual revenue was 1.588 billion yuan, an increase of 140.9% from the same period last year; the revenue of 2C business was 1.347 billion yuan, an increase of 264.5% year-on-year; operating business losses were 1.292 billion yuan, a substantial decrease of nearly 50% compared with 2.488 billion yuan in the same period last year.
Compared with the financial results of the last quarter, Uxin's sales have increased a lot in the previous month, but the net loss has still narrowed. In the third quarter, Uxin's total revenue reached 461 million yuan, an increase of 33% year-on-year; the loss narrowed by 40% year-on-year, and fell 19% from the previous quarter.
According to this financial report, the overall performance of Uxin's used cars is still not very satisfactory, which may also be an important reason for its sluggish stock price. As the first Chinese listed e-commerce platform of second-hand cars, Uxin seems to have just caught up early, and has not attracted more investors in the capital market. So back to the earnings report itself, why does Uxin's performance worry the outside world during the quarter?
Competition has intensified as second-hand car platform follows up global purchase business
During the quarter, Uxin's 2C global purchase transaction reached 28,000, an increase of 26.5% year-on-year; 2C transaction revenue was 388 million, an increase of 64.6% year-on-year, accounting for 83.3% of total revenue.
In the last quarter, Uxin announced that it would sell the B2B auction business to 58. com. At present, the plan has been settled. Therefore, Uxin's development focus is still the global purchase business.
In 2019, China's auto market ushered in a "transition period", the growth rate of new cars has slowed down, and second-hand car transactions were in full swing, becoming the main force driving automobile consumption. According to data released by the China Automobile Association, in the first three quarters of this year, the cumulative transaction volume of used cars in China was 9.273 million, an increase of 3.89% year-on-year, and the transaction amount reached 588.028 billion yuan. At present, the development momentum of the used car business in the country is still good, which may also be an important reason for Uxin to focus on the development of global purchase business.
Although Uxin's global purchase data for second-hand cars performed well, it's not easy to maintain steady growth. There is also a certain risk for the company whose focus is the global purchase business, especially it is facing the pressure inside and outside.
1. Uxin's service frequently encountered consumer complaints, and the platform's reputation was questioned
At present, the resources and attention of second-hand car e-commerce are inclined to acquisition. The improvement of service quality and business models are ignored. The lack of integrity and inefficiency problems still exist. Those problems exist in many second-hand car e-commerce platforms. There is a lot of news on the Internet about Uxin's consumer complaints, which can affect consumers' trust in Uxin's platform.
For e-commerce auto platforms, consumer after-sales feedback is very important. Obviously, Uxin do not pay enough attention to this part. When the editor searched Uxin, there were many complaints about it, and the satisfaction was not high. Among them, consumer complaints are mainly concentrated on services, prices, loans of various aspects and so on. Once it does not pay enough attention to improving the satisfaction of consumers on services, and only focuses on completing pre-sale transactions, and its subsequent cost to produce a good brand effect will be higher. This is also the main reason for consumers' concerns about whether the used car e-commerce platform is reliable.
2.The used car platform follows up the global purchase business, the competition of the entire second-hand car industry has intensified
In recent years, second-hand car platforms have devoted their energy to two businesses - physical stores and global purchase business. On the one hand, the offline stores can provide sellers with a place to experience cars, which can increase transaction volume. On the other hand, in order to break geographical constraints for second-hand car transactions, global purchase model is launched. At present, many used car platforms have launched the global purchase business. It is foreseeable that the competition in this business will intensify, especially that Guazi is also accelerating the global purchase business.
In the opinion of the industry, the competitive factors in global purchase of second-hand cars include the source, condition, price, and after-sales, which is also the key to deciding the breakthrough of a used car e-commerce platform. The second-hand car e-commerce companies have basically made a localized car purchase model. For example, Guazi has gradually accumulated a full set of mature operating experience from collection, inspection, sales to the automotive aftermarket, and second-hand car finance, which laid a solid foundation for the promotion of global purchase business. On the premise that Uxin has not yet had obvious advantages, it is not difficult to continue to achieve greater breakthroughs in the global purchase business.
Sustained losses cause investors to question its profitability
During the quarter, Uxin continuing business diluted loss per share was 0.45 yuan, and non-GAAP adjusted net loss per share for continuing operations was 0.65 yuan. Since listing, Uxin has been in a loss, which has increasingly made investors question the company's future profitability.
In order to recoup the losses, Uxin must cut down some business. In March 2019, Uxin sold its B2B second-hand car auction business to 58.com with $105 million. In July 2019, Uxin sold its loan assistance business to 58.com Financial's Golden Pacer, which received $100 million in cash. In January 2020, Uxin also sold its accident car auction business to Bochewang with 330 million yuan, and it promised not to engage in accident car auction business within five years.
Judging from this series of actions, Uxin can only rely on selling its business in exchange for funds, so as to maintain its development of global purchase business, why is Uxin in continuous loss?
The main reason is that Uxin can not make profit by itself. Many attempts have been made from C2B, B2B to C2C, but no matter what model, the common problem is the low customer price and low profit, and it has not yet formed a mature business model. Although Uxin has tried many new businesses, it failed to bring it a healthy and stable source of cash flow.
The large cost of expenditure is also an important reason for the loss. During the quarter, Uxin's cost expenditure was not low, what's worse, the complexity of the used car transaction link also increased the cost. As we all know, second-hand car e-commerce platform generally adopts a large-scale advertising marketing strategy. In order to increase brand influence and let more users choose it, the marketing cost is essential.
Can Uxin catch the opportunity as the auto industry slowdown and the support of policy during the epidemic?
Prior to the release of this financial report, China broke out a severe epidemic in February, which may also be an important reason for Uxin delayed financial report. In the first quarter, Uxin's overall performance was not very good, which basically was in a downward trend.
Under the influence of the epidemic, China's auto industry sales have shrunk. According to data released by the China Association of Automobile Manufacturers, China's car sales in January 2020 were only 1.941 million, a decrease of 26.98% from the previous month and an 18% decrease from the same period last year. The sales of the same second-hand car industry are not satisfactory, which will naturally affect the performance of Uxin's performance in the first quarter, especially now Uxin's business is concentrated in the global purchase business. During the outbreak, the purchase of used cars is greatly affected.
With the gradual control of the epidemic, China has also taken a number of measures to promote the recovery of the automotive industry, which are effective in driving car sales. On April 9, the Ministry of Commerce stated that it will speed up the revision of the "Management Measures for Used Car Circulation", in which the long-awaited relocation policy of the used car industry is expected to be completely eliminated. According to the data released by the China Association of Automobile Manufacturers, China's automobile production and sales in March were approximately 1.422 million and 1.43 million, with a chain growth of 399.2% and 361.4% respectively.
The ratio of cross-regional transfer of used cars in 2019 increased by 8.7 percentage points from 2015. People in the industry generally believe that the abolition of the restriction policy can encourage more used cars to enter the market and maximize the use of resources. At the same time, the increase in supply and demand will also allow consumers to buy good cars at lower costs and promote new car consumption. The value-added tax rate of second-hand cars has been reduced from 2% to 0.5%, which will help new car dealers to greatly increase the replacement rate through the business of used car transactions.
At present, the development of China's second-hand car market is still relatively lagging. Compared with developed countries, China's second-hand car transaction volume accounts for a relatively low proportion of ownership. Overall, there is still much room for the development of the second-hand car market in the future.
After Uxin sold its B2B used car auction business to 58.com, the business focus is also on the global purchase business. Whether the follow-up can integrate resources well, seize the favorable policies of the automobile industry, and further promote the development of the national purchase business may be the key to affecting the growth of Uxin.
As the first Chinese listed e-commerce platform of second-hand cars in the United States, Uxin has also attracted the attention of many investors in the early stages of listing, especially with the presence of foreign used car giant CarGurus. Therefore, it still has opportunity to attract more investors by the growth potential of used cars in China. Unfortunately, Uxin has not brought enough imagination space to investors in terms of revenue since its IPO, especially it has been in a loss, which also aggravates investors' doubts about its profitability.
Under the influence of this epidemic, it is undeniable that it has a certain impact on Uxin's financial report in the first quarter. It is likely that its revenue will decline and losses will increase, which makes Uxin's situation more difficult. As Uxin hopes to be all-in on the global purchase business, the follow-up development focus will also be on this business. How to make a breakthrough in revenue growth and further reduce losses may be an important aspect for Uxin to retain its investors.
This is an article from WeChat official accounts MeiGuyanjiushe (ID: meigushe), translated by Chris Yuan.