Uxin Limited - Earnings Call - Q3 2025

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's earnings conference call for the quarter ended September 30th, 2025. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer 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, Ms. Ally Wang. Please go ahead, Ally.

Thank you, Operator. Hello, everyone. Welcome to Uxin's earnings conference call for the third quarter ended September 30th, 2025. On the call with me today, we have DK, our founder and CEO, and John Lin, our CFO. DK will review business operations and company highlights, followed by John, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session that follows. Before we proceed, I would like to remind you that this call may contain forward-looking statements which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Now, with that, I'll turn the call over to our CEO, DK. Please go ahead, sir.

Dai Kun (Founder and CEO)

[Foreign language]

Hello, everyone, and thank you for joining Uxin's earnings conference call today. It is a pleasure to reconnect with our investors through this call, and we appreciate your continued interest and support. To better facilitate communication with both our domestic and international investors, I will be sharing our latest business updates in both Chinese and English.

[Foreign language]

In the third quarter of 2025, we continued to build strong growth momentum. Retail transaction volume reached 14,020 units, representing a 134% year-over-year increase, and marking the sixth consecutive quarter of year-over-year growth above 130%. Despite a significant expansion in inventory, our inventory turnover remained at around 30 days. Customer satisfaction also remained at an industry-leading level. Our Net Promoter Score was 67 this quarter, sustaining a level of 65 or above for six consecutive quarters, the highest in the industry. At the same time, profitability continued to improve, with gross margin increasing to 7.5%, the highest level we have achieved in the past three years.

[Foreign language]

The expansion of our superstore network has also continued to progress smoothly and in line with our plan. Earlier this week, our Jinan superstore officially commenced operations. Together with the Wuhan and Zhengzhou superstores that opened earlier this year, we have now completed all three new superstore openings planned for 2025. Our Wuhan superstore, which opened in February, is expected to reach nearly 1,800 retail units in December, with local market share approaching 10%. The store continues to operate in a phase of rapid growth. Meanwhile, our Zhengzhou superstore, which opened in late September, has been operating for just three months and is already expected to achieve approximately 900 retail units in December, with market share nearing 5%.

Zhengzhou has already become the largest used car retailer in its local market, and both its sales ramp-up and profitability trajectory are progressing faster than what we experienced at the Wuhan superstore. With these additions, we now have five superstores in operation. The continued ramp-up of newly opened locations, together with sustained growth across our existing stores, will remain a key driver of the company's performance going forward.

[Foreign language]

In addition, over the past few months, we have announced strategic partnerships with local governments in Tianjin, Guangzhou, and Yinchuan to jointly invest in and operate new used car superstores. Each of these projects is designed to support a capacity of more than 3,000 vehicles for display and sale. These partnerships extend our service coverage across northern, northwestern, and southern China, further strengthening the foundation for our long-term growth. Meanwhile, we are actively advancing superstore projects in several other cities, and we plan to open four to six additional superstores in 2026, marking a transition into a phase of accelerated nationwide expansion for our business.

[Foreign language]

By now, we believe that Uxin has established a clear and proven path to scaling its business model nationwide, driven by the coordinated execution of three core capabilities that are more precise pricing, higher customer satisfaction, and superior operating efficiency. First, our machine learning-based pricing system becomes increasingly effective as our retail scale expands. With a growing base of real transaction data used to train our models, pricing accuracy continues to improve, ensuring that each vehicle is competitively priced in real time. This allows us to maintain high inventory turnover of around 30 days. Second, our landmark large-scale superstores play a critical role in enhancing the customer experience. By offering high-quality, competitively priced vehicles supported by professional and reliable services, we are able to consistently improve customer satisfaction and referral rates, creating a self-reinforcing cycle of brand trust and organic growth.

Third, our fully integrated factory logistics retail operating model enables end-to-end control across procurement, reconditioning, and retail sales. This model delivers operational efficiency that significantly outperforms traditional used car dealers while remaining highly standardized and replicable. As a result, new superstores reach maturity faster and losses during the early ramp-up phase are more predictable and better controlled.

[Foreign language]

Going forward, as long as the market conditions remain stable, we are highly confident in the sustained and rapid growth of our business. As such, for the fourth quarter, we expect our retail transaction volume to exceed 18,500 units, representing a year-over-year growth of more than 110%. For the full year 2025, we expect retail transaction volume to surpass 50,000 units, reflecting year-over-year growth of more than 130%.

[Foreign language]John, please.

With that, I'll turn the call over to our CFO to walk you through the financial results. John, please.

John Lin (CFO)

Okay. Thank you, DK. [Foreign language]

Thank you, DK. Hello, everyone. I will continue to present the company's performance in both Chinese and English to better communicate with all of you.

Dai Kun (Founder and CEO)

[Foreign language]

In the third quarter, our retail transaction volume reached 14,020, representing a 134% increase year-over-year and a 35% increase quarter-over-quarter. Sales at our existing superstores continue to grow, while new superstores have come into operation progressively. Looking ahead, we expect our retail transaction volume to maintain a high growth trajectory over the next several years.

John Lin (CFO)

[Foreign language]

Retail revenue for the quarter totaled RMB 820 million, up 84% year-over-year and 35% quarter-over-quarter. The average selling price or ASP for retail vehicles was RMB 58 thousand, compared to RMB 59 thousand in the prior quarter and RMB 74 thousand in the same period last year. While ASP declined as we shifted toward a more affordable inventory mix, the strong growth in transaction volume more than offset the pricing impact and drove our overall revenue expansion. Our current inventory structure is well aligned with mainstream consumer demand, and we believe pricing has now stabilized at a rational level. As such, we expect ASP to remain relatively steady in the near term.

[Foreign language]

Turning to our wholesale business, our wholesale transaction volume was 1,884 units in the third quarter, representing an 81% increase year-over-year and a 54% increase quarter-over-quarter. Total wholesale revenue was RMB 33.2 million. Combining both retail and wholesale, total revenue for the quarter reached RMB 879 million, representing a 77% increase year-over-year and a 34% increase quarter-over-quarter.

[Foreign language]

Gross margin for the quarter was 7.5%, up 0.5 percentage points from 7% a year ago and up 2.3 percentage points from 5.2% in the prior quarter, marking the highest level over the past three years. The improvement was primarily attributable to the easing of the price competition in the new car segment during the third quarter, which supported a rapid margin recovery in the used car market. In addition, our Wuhan superstore, which opened in February, has moved beyond its startup phase, with margin performance continuing to ramp up and driving a meaningful lift to this quarter's gross margin.

[Foreign language]

Adjusted EBITDA loss for the quarter narrowed significantly to RMB 5.3 million, representing a substantial 43% reduction year-over-year and a 68% reduction quarter-over-quarter.

[Foreign language]

Looking ahead to the fourth quarter of 2025, we expect retail transaction volume to exceed 18,500 units, representing year-over-year growth of over 110%. Total revenue is expected to exceed RMB 1.15 billion. For the full year 2025, we expect retail transaction volume to exceed 50,000 units, representing year-over-year growth of over 130%.

[Foreign language]

That concludes our prepared remarks for today. Thank you, everyone. Operator, we're now ready to begin the Q&A session.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Once again, to ask a question, please press star then one on your touch-tone phone. At this time, we will pause momentarily to assemble our roster. Once again, to ask a question, please press star then one to join the question queue. Press star then one to join the question queue. The first question today comes from Dai Wenjie with SWS Research. Please go ahead.

Wenjie Dai (Analyst)

[Foreign language] Okay, congratulations, and now we see gross margin reached 7.5% this quarter, three-year high. How does management view the sustainability of the current margin level, and what factors could further drive margin improvement go forward? Thank you.

John Lin (CFO)

[Foreign language]

This quarter's gross margin was 7.5%, representing a new high since we transitioned to the self-operated model, and there are two main drivers behind this improvement. First, new car pricing has stabilized, which naturally supports a recovery in used car profitability. At our existing Xi'an and Hefei superstores, gross margin exceeded 8%, up nearly two percentage points sequentially. Second, profitability at our new Wuhan superstore has also been improving. Our Wuhan superstore officially opened in February and started from the third quarter. Its gross margin has improved significantly compared with the early operation phase in the second quarter.

[Foreign language]

Looking ahead, we believe there is still substantial room for further margin expansion. First, as China continues to implement policies aimed at reducing excessive competition in the auto industry, we expect vehicle prices to remain stable or even trend upward over the coming quarters, which would be supportive for our margins. Second, as DK just mentioned, our data-driven pricing capabilities continue to improve. Pricing errors are becoming less frequent, and the proportion of loss-making vehicles is declining.

[Foreign language]

Finally, our value-added services still have significant penetration upside, as higher margin ancillary revenue contributes more meaningfully to our revenue mix. This will further lift our gross margin.

[Foreign language]

Over the long term, our target gross margin is around 10%. At our existing Xi'an and Hefei superstores, we are already seeing gross margin approaching this target, which gives us strong confidence in continued margin expansion.

Okay. [Foreign language]

That's my answer, thank you.

Wenjie Dai (Analyst)

[Foreign language] Thank you, thank you very much.

Operator (participant)

The next question comes from Fei Dai with TF Securities. Please go ahead.

Fei Dai (Analyst)

[Foreign language] My first question is, following the opening of the Zhengzhou superstore, both sales and profitability run-up seems to be faster than what we saw in Wuhan. Could management share what key initiatives drove this outperformance? And looking ahead, how long do you expect the newly opened superstores to take to reach stable operations? Thank you.

Dai Kun (Founder and CEO)

[Foreign language]

Fei Dai (Analyst)

[Foreign language]

Dai Kun (Founder and CEO)

[Foreign language]

Thank you for your question. Our Zhengzhou superstore has only been operating for about three months, and monthly sales have already reached 900 units. Its profitability is also higher than what we saw at the same stage for the Wuhan superstore. On the one hand, our Wuhan superstore can be viewed as the first large-scale replication of our superstore model, and it's already performing meaningfully better than our Xi'an and Hefei superstores. Zhengzhou, in turn, benefited directly from what we learned in Wuhan, from construction and launch to inventory build and sales ramp-up, so our organization and operating systems are running more smoothly.

[Foreign language]

On the other hand, as our sales volume expands, we now have a much larger pool of real transaction data to train our pricing system. This has further improved our pricing capability. The pricing system has adapted more effectively to the Zhengzhou market, with more precise pricing, which helps ensure sales efficiency and supports stronger profitability in the early stages of operation.

[Foreign language]

For a standard new superstore with a planned capacity of approximately 3,000 vehicles, our current expectation is that it reaches break-even in about nine months. This is consistent with what we achieved at the Wuhan superstore. We expect inventory to reach its planned capacity in about 18 to 24 months, at which point both sales volume and profitability should reach a mature and stable level.

[Foreign language]

Fei Dai (Analyst)

[Foreign language] My second question is, U.S. used car company Carvana recently surpassed a $100 billion market cap. Could management comment on the key similarities and difference between Carvana's model and Uxin? Thank you.

Dai Kun (Founder and CEO)

[Foreign language]

Carvana is a leading used car.

Please go ahead.

Carvana is a leading used car company in the U.S. and has delivered very strong capital market performance. We have conducted in-depth research on Carvana.

[Foreign language]

Starting with the differences, the biggest distinction is the sales channel. Carvana sells online while Uxin operates through both offline superstores and an online marketplace. Currently, over 70% of our sales come from offline superstores, with online contributing roughly 30%. This mainly reflects the different market realities in China and the U.S. At this stage in China, a car typically represents a larger share of a household's assets, so people make purchase decisions more cautiously. As a result, many consumers still want an in-store experience and a test drive before buying a used car. Over time, as auto consumption continues to develop and trust in the used car market keeps improving, we do expect the online share to increase as well.

[Foreign language]

That said, we share many similarities. First, both companies operate under an own inventory model, with large-scale reconditioning through self-operated facilities and tight control over every step of the process to reduce per unit cost and improve inventory turnover efficiency.

[Foreign language]

Second, given that used cars are a highly non-standardized product, both Carvana and Uxin focus on precise pricing to ensure efficient vehicle turnover. Carvana's annual retail volume is around 500,000 units, while Uxin currently sells about 50,000 per year. These real transactions form the most critical training data for pricing models. As our retail scale continues to expand, we expect our pricing capabilities to further strengthen.

[Foreign language]

Third, both companies prioritize customer satisfaction and brand reputation. Carvana's NPS is above 80, and our NPS reached 67 this quarter and has remained at the highest level in the industry for more than a dozen consecutive quarters. Strong word-of-mouth reflects the value we deliver to customers and also drives incremental referral traffic.

[Foreign language]

Today, Uxin is a used car company with annual retail volume of approximately 50,000 units. We are highly confident that by continuing along our current development path, we can sustain year-over-year sales growth of more than 100% over the next several years and reach Carvana's current sales volume within four to five years. That's all I wanted to share. Thank you.

Fei Dai (Analyst)

[Foreign language]

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

Thank you all for participating on today's call. We are looking forward to reporting to you soon.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.