Uxin Ltd. Q2 FY2027 earnings call

• Market Consolidation: The Chinese automotive industry is undergoing accelerated consolidation, with new passenger vehicle sales down >20% YoY and ICE sales down ~40%. Approximately 30,000 used car dealerships exited in H1, with 50,000-60,000 expected for the full year.
• Operational Efficiency: Inventory turnover improved from ~30 days to ~20 days, driven by AI-enhanced pricing systems and integrated end-to-end operating systems (inspection, reconditioning, CRM).
• Digitalization & Scale: Yuxin’s Net Promoter Score (NPS) remains at 68, the highest in the industry. The 'superstore' model is validated, with six new stores under construction (Yinchuan, Guangzhou, Wuxi, Chongqing, Shijiazhuang, Shaoxing).
• Profitability Recovery: While Q2 margins were pressured by price volatility, per-unit profitability has recovered rapidly since early Q3. Management expects gross margin to recover to above 6%.
• Strategic Focus: The company maintains a prudent procurement strategy, prioritizing capital efficiency and inventory turnover over aggressive volume expansion during high-risk periods.

The company reported total revenue of 1.151 billion RMB, up 75% year-over-year and 7% sequentially. Retail vehicle sales revenue was 1.08 billion RMB (up 78% YoY, ~7% QoQ), representing approximately 94% of total revenue. Wholesale revenue was 37.4 million RMB (up 88% YoY, 36% QoQ). Gross margin contracted significantly to -0.7% due to rapid price adjustments in the new car market affecting inventory values, compared to 5.2% YoY and 7% in the prior quarter.

• Q3 Retail Volume: Expected between 20,500 and 21,000 units, representing nearly 50% year-over-year growth.
• Q3 Revenue: Total revenue projected between 1.16 billion RMB and 1.19 billion RMB.
• Q3 Margin: Overall gross margin expected to recover to above 6%.
• ASP Stability: Average Selling Price (ASP) is expected to remain relatively stable, having settled around 55,000 RMB after declines from 61,000 RMB (Q1) and 59,000 RMB (YoY).
• Financing Update: $4 million received from Neo Capital; remaining $4 million proceeding at $2.86 per ADS. Joy Capital ODI filing is active.

• Price Volatility: Rapid declines in new ICE car prices directly impacted used car valuations, causing significant gross margin fluctuation (-0.7%) in Q2.
• Market Demand: Broader auto consumption remains weak, with continued declines in both new and used car transaction volumes.
• Competitive Landscape: Industry consolidation creates exit risks for smaller players but requires Yuxin to maintain scale and digital advantages to capture market share.
• Execution Risk: Maintaining 20-day inventory turnover while managing price risk requires precise AI-driven pricing and operational execution.

Q: How did management achieve the reduction in inventory turnover from 30 to 20 days, and is this sustainable?

A: Management attributed the improvement to two main factors: the deployment of AI across pricing, adjustment, and risk alerts, and the integration of end-to-end operating systems (inspection, reconditioning, CRM). They emphasized that faster turnover reduces price risk exposure and limits impairment losses. Crucially, they stated that a 20-day cycle is not a short-term defensive tactic but a core long-term operating target designed to unlock greater operating leverage and stabilize per-unit profitability.

Q: What are the current trends in the used car market and competitive landscape following the Q2 price shock?

A: Management noted that while Q2 saw sharp monthly price declines, conditions have stabilized in Q3, though nationwide used car transactions still declined YoY. The industry is consolidating rapidly, with over 20% of dealerships exiting. Management views this as an opportunity to gain market share due to their scale and digital capabilities. They expect Q4 to be a peak season with less intense volatility than Q2, adjusting procurement prudently based on price stability.

Q: Can you provide an update on the CEO's stock purchase plan?

A: The CEO announced a Rule 10b-5-1 trading plan established on June 30 to purchase up to $5 million of ADSs at no more than $2.85 per share. Following a mandatory 90-day cooling-off period, purchases will begin on September 28. The CEO stated that buying will occur gradually, subject to daily trading volume constraints, to align personal interests with shareholders and demonstrate confidence in the company's long-term value.