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• Industry Context: The Chinese second-hand car market faced intense competition and price drops in H1 2026, leading to a 10-15% drop in dealer inventory stocks and losses for over 70% of manufacturers. However, total trading volume grew 1.5% to 9.72 million units, with June seeing second-hand sales exceed new car sales.
• AI Integration: DaFeng is deploying AI tools categorized as business assistants (pricing/data), digital employees (self-media operators, management assistance), and platform-level intelligence. Internal AI adoption has driven significant cost reductions: management costs down 14%, sales/marketing down 14%, and R&D down 29%.
• International Expansion: China’s second-hand car exports grew 61% in H1 2026, driven by competitive pricing and new regulations blocking 'fake' exports. DaFeng leverages its real-time inventory data (>1.7 million units) and logistics services to capture global opportunities.
• Operational Metrics: Average active business owners were 65,334; average active users were ~200,000. Commercialized businesses reached 9,146 with an average income of 6,672 RMB per owner. Total commercialized trading services were 214,451 with an average income of 259 RMB per service.
• Strategic Focus: The company is shifting focus from pure digital solutions to high-margin trading services. It aims to deepen penetration among existing dealers and expand into new trading verticals.

• Management did not provide specific quantitative forward-looking financial guidance for future quarters.
• Qualitatively, management emphasized a continued strategic shift toward increasing revenue from trading-related services rather than digital subscriptions.
• They indicated that while some legacy business lines may shrink, the overall structure adjustment is intended to improve revenue quality and profitability.
• No upward or downward revisions to prior full-year estimates were explicitly stated, but the focus on efficiency and cost control suggests a priority on margin improvement.

The company reported total revenue growth of 3.7% year-over-year. The primary driver of this growth was an increase in software services provided to main airports, while marketing service revenue disappeared due to the cessation of such services in 2026. Second-hand car transaction volumes remained relatively flat. The management noted that as trading service revenue grows, the relative contribution ratio of digital solution revenues is expected to decline, though specific absolute financial figures for individual segments were not detailed beyond these qualitative shifts.

• Market Volatility: Severe price fluctuations in new and used cars create inventory risks for dealers, potentially reducing their ability to pay for services.
• Regulatory Changes: New export rules regarding vehicle age and registration status have altered the export landscape, requiring adaptation to 'real' second-hand car trade.
• EV Transition Complexity: The rapid rise of New Energy Vehicles (NEVs) increases SKU complexity and valuation uncertainty, though management views this as an opportunity for better data-driven pricing and inspection services.
• Competitive Pressure: Over 70% of dealers are currently unprofitable, raising the risk of business churn if they cannot adapt to data-driven operations.

Q: What are the key strategic focuses for H2 2026 and which businesses will drive future profits?

A: CEO Junhong Yao outlined two main strategies: deepening penetration of the DaFeng operating system among existing dealers and increasing revenue per user through deeper commercialization. CFO Zou Qing clarified that >90% of future income and growth will come from trading services (e.g., B2B matching, inspections, logistics) rather than digital subscriptions. While some legacy lines may shrink, the focus is on scaling transaction-based revenue and gradually commercializing AI applications.

Q: How does the rising share of New Energy Vehicles (NEVs) impact the business model and industry dynamics?

A: CEO Yao noted that NEV penetration in the secondary market is currently around 18-19%, lower than new car sales (~36%). He explained that EV residual values are currently harder to predict than ICE vehicles, creating volatility. However, CFO Zou added that EVs introduce more SKUs and configurations, increasing the need for sophisticated data systems to manage value. Since DaFeng’s revenue is transaction-driven, any car with residual value flowing between parties generates income, regardless of powertrain type. Additionally, EVs require specialized battery inspections, creating new service opportunities.

Q: Will industry consolidation lead to fewer active dealer accounts on the platform, similar to CarMax in the US?

A: CEO Yao argued that the Chinese market will not see large-scale consolidated players like CarMax due to volatile new car prices and fragmented supply chains lacking stable auction channels. He stated that small and medium-sized dealers will remain dominant (94-95% of capacity). Therefore, while individual dealer numbers might fluctuate, the platform expects sustained activity from these smaller entities. The focus is on supporting these SMEs with data and tools rather than replacing them with large centralized inventories.