Uxin Limited
Q4 2021 Earnings Call Transcript

Published: 30 Jul 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to Uxin's Earnings Conference Call for the Fourth Quarter ended March 2021. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a Q&A session. Today’s conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host for today's conference call, Mr. Eric Yuan. Please go ahead, sir.

[Eric Yuan:]

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the quarter ended March 31, 2021, and the full fiscal year 2021. On the call today are D.K., the Founder and CEO; and John Lin, CFO. D.K will review business operations and the company highlights, followed by John, who will discuss financials and the guidance. They will both be available to answer your questions during the Q&A session that follows.

[Kun Dai:]

Hello, everyone. Thank you for joining our earnings conference call today. To better communicate with both domestic and international members. My prepared remarks today will be in both English and Chinese. We are pleased to report another solid performance for the quarter ending March 31, 2021. In spite of a slower quarter in the Chinese domestic used car market due to the Chinese New Year holiday and the constraints on our working capital, we still delivered our operational targets set last quarter. As you can see from our guidance for the quarter ended June 2021, Uxin has returned to a solid growth trajectory, following our successful transformation into an inventory-only model. From October 2020 to July 12, 2021, we faced challenge of sustaining sufficient working capital for our operations. This also put significant pressure on our ability to continue as a growing concern. Despite the pressing financial constraints, we overcame many difficulties and delivered some key achievements. First of all, we transformed our business into an inventory-only model, instead of only being a platform-based model. This was a critical decision, driven by the enormous pressure on our business from the combined impact of COVID-19 and severe capital constraints. We faced the challenge head on and successfully transformed the business with a stronger foundation of a much linear and efficient operation. As a customer-centric company, we believe the key to creating customer value is to continuously improve our customer satisfaction. In our used car transaction, the key to customer transaction -- the customer satisfaction is to enhance vehicle quality and provide best-in-class after-sales services. Under an inventory-only model, we can better control over the quality of vehicles.

[John Lin:]

Okay. Thanks, D.K. Hello, everyone. Thanks for joining us today. As D.K just mentioned, Uxin underwent some significant and profound changes in the fiscal year 2021. Also, after we shifted into the inventory-owning model, the accounting treatment for revenue recognition and the structure of cost expenses were also adjusted accordingly. Therefore, the financial data in the first fiscal year 2021 was not directly comparable with the data for the fiscal year 2020. Overall speaking, our total vehicle sales in the fiscal year 2021 were lower than the prior fiscal year, but we were able to dramatically improve our operational efficiency. As you all know in the past year, we went through a tough time. So, the company took resolute, but carefully planned actions to reduce costs and expenses. This led to a much lower operational loss in the fiscal year 2021 comparable to fiscal year 2020. If you look at the results just released, our total vehicle sales in the fourth quarter were lower than the previous quarter. First, in this quarter, we had the Chinese New Year holiday. So, Q4 was traditionally off season for the Chinese used car market. Second, our efforts to expand our vehicle inventory was restrained by our cash constraints. But at the same time, we continue to vigorously reduce cost and expenses and the benefit of those actions were further reflected -- will be further reflected on our financials in the next quarter.

[Kun Dai:]

Operator, we are ready to take questions now. Thank you.

[Operator:]

Certainly. Your first question comes from the line of Eddy Wang of Morgan Stanley. Please ask your question.

[Eddy Wang:]

I have two questions. First is about the used car industry. We noticed that in the second quarter of this year, the new car sales actually was weaker than we expected. I'm not sure what kind of market condition of the used car market in China. And when do you expect that the used car markets could see some recovery or even accelerate in terms of the transaction volume going forward? My second question actually is regarding to the competition as well as the business model. As D.K mentioned that we are now mainly adopting the inventory owning business model. So how do you think the competition going forward among the different business model adopted by different used car platform? And why you choose this model? And how do you think -- do you think this model will be the mainstream model going forward for all these online used car platforms, or you will think that a different model will also have a different chance in this used car market in China? Thank you.

[Kun Dai:]

Eddy, in terms of the market, we think the trend is getting better for sure. On the one hand, the size of the existing market is growing. So the number of the vehicles available for sale is kept increasing and the interest of car from the potential buyers is stronger. And the customers have become more adaptive to select a used car, in particular, on those with high value for money cars. After careful screening and refurbished, the quality of used cars sold on our platforms is approaching the level of new ones. While their price is much cheaper and much more competitive, this brings substantial value to our customers. And on the second hand, we saw favorable policies towards this market in the past few years. In 2019, used cars are allowed to be transferred between the sellers and the buyers who are in different cities. And in 2020, government reduced the related VAT for used car transaction. And earlier this year, we saw the launch of digital registrations for transactions, which makes the whole process much more convenient. And in the past July, the new circulation in economic policy also promotes the development of our sector. So we are welcoming the golden window of time from the perspective of policymaking. Thank you. Okay. So in terms of competition, after 10 years of development, we now formally believe that used car market in China is not a winner takes all market. The critical thing is to take the advantage of our own spreads. We need to have a clear mind of what type of products we want to offer and know the profiles of our customers. And we know how to consistently improve our products and sales channels. We focus on how to make each car on our platform better and make our customers satisfied. So in our view, if other industry players are willing to improve the trust of consumers, increase the transparency and do positive things for the overall industry, we actually like to treat them more as our allies rather than competitors. So in addition, we think the real competition happens on the level of customer service and product quality. Such competition is beneficial to the whole industry as it drives the market participants to learn from each other and keep improving themselves. Thanks, Eddy.

[Eddy Wang:]

[Operator:]

Your next question comes from the line of . Please ask your question.

[Unidentified Analyst:]

To repeat my question in English. Uxin recently raised investment from NIO Capital and Joy Capital. How will you use this money to promote the development of your new business model? Thank you.

[Kun Dai:]

First of all, we and our new investors have strong consensus on strategies. So in particular, you can see NIO is a consumer-facing company, which actually pays great attention to customers, which is highly aligned with our business philosophy. So because of our business transformation in 2020, we regard user needs, vehicle quality and NPS as the most important things for us. And we have established a consensus with our new investors on strategies and value propositions. So after receiving the investment, we will work together on a key strategic fronts and enhance our digital and automation capabilities to further improve our vehicle quality control and production efficiency. In addition, the additional financing capital will also allow us to expand our inventory and scale up our business. Thank you.

[Unidentified Analyst:]

Thank you.

[Operator:]

As there are no further questions, this will conclude today's conference call. You may now disconnect your lines. Thank you.