Uxin Ltd. Sponsored ADR Stock

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the quarter ended June 30, 2026. [Operator Instructions]

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. Ali Wang. Please go ahead, Ali.

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the second quarter ended June 30, 2026. On the call with me today, we have D.K., our Founder and CEO; and John Lin, our CFO. D.K. 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, D.K. Please go ahead, sir.

[Interpreted] 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. I would like to begin with an overview of our operating performance this quarter and then discuss some of the adjustments we have made in response to changing market conditions.

2026 has become a year of accelerated consolidation for China's automotive industry. The new car market has remained under pressure since the beginning of the year. In the second quarter, new passenger vehicle sales in China declined by more than 20% year-over-year, with internal combustion engine or ICE car sales down nearly 40%, and by comparison, the mainstream and the used car market has shown greater resilience with nationwide used car transactions declining by only about 1.4% year-over-year in the second quarter.

However, the rapid decline in new car prices, particularly for ICE cars, continue to flow through to the used car market, accelerating industry consolidation. Nearly 30,000 brick-and-mortar use car dealerships exited the market during the first half of the year, and we expect 50,000 to 60,000 dealerships to exit for the full year, representing more than 20% of the industry.

Uxin significantly outperformed the broader market in the second quarter. Our retail transaction volume reached 19,610 units, up 89% year-over-year and 19% sequentially. Our Net Promoter Score, or NPS, remained at 68, continuing to rank among the highest in the industry.

Price volatility during the second quarter had a temporary impact on our gross margin, and we proactively accelerated inventory adjustments and sell-through. Since the beginning of the third quarter, our per unit profitability has recovered rapidly, and we expect our overall gross margin to recover to above 6%.

Since the beginning of this year, we have also continued to advance the digitalization of our business while systematically upgrading our operations. As we accumulate more transaction data, our pricing system has improved significantly in pricing accuracy, coverage and response time, enabling us to respond to market changes more quickly and accurately. These improvements in our pricing capabilities are also reflected in our operating efficiency. Our overall inventory turnover has now shortened from approximately 30 days to approximately 20 days.

We believe 2026 could mark the beginning of a new phase in the evolution of China's used car industry. Traditional operating models are rapidly losing ground while the industry is gradually shifting from a fragmented and nonstandardized model towards a more scaled standardized and digitalized retail model. We believe the next 2 to 3 years will be a critical period for the reshaping of China's used car market.

Throughout this transition, Uxin will continue to maintain its leading position. Over the past several years, we have validated our superstore model and continue to strengthen our core operating capabilities across vehicle pricing, inspection and reconditioning, inventory turnover and customer service. Today, we are able to maintain a rapid inventory turnover of approximately 20 days while achieving healthy per unit profitability.

Sales volumes and operating efficiency at our existing superstores will continue to ramp up while 6 new superstores in Yinchuan, Guangzhou, Wuxi, Chongqing, Shijiazhuang, and Shaoxing are currently under development. At the same time, we're steadily advancing discussions with additional cities on new partnerships as we continue to expand our warehouse-style superstore network nationwide.

Finally, I would like to share our outlook for the third quarter. Our inventory turnover and profitability have both returned to healthy levels. However, we believe risks in the automotive market remain elevated. We are, therefore, maintaining a prudent operating approach, placing greater emphasis on inventory turnover per unit profitability and capital efficiency. For the third quarter, we expect retail transaction volume to reach between 20,500 and 21,000 units, representing year-over-year growth of nearly 50%.

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

[Interpreted] Thank you, D.K. Hello, everyone. I will now walk you through our financial performance.

In the second quarter, our retail transaction volume reached 19,610 units, up 89% year-over-year and 19% sequentially. Despite continued pressure across the broader automotive market, we maintained inventory turnover of approximately 30 days and delivered business growth well above industry levels.

Retail vehicle sales revenue totaled RMB 1.08 billion, up 78% year-over-year and approximately 7% sequentially. The average selling price or ASP of our retail vehicles was RMB 55,000 compared with RMB 59,000 in the same period last year and RMB 61,000 last quarter. While lower market prices resulted in a decline in ASP, the rapid growth in sales volume offset this impact. Our current price range covers the car buying needs of the vast majority of mainstream consumers. As price volatility in the automotive market gradually eases, we do not expect ASP to decline significantly from current levels and expect it to remain relatively stable overall.

Turning to our wholesale business. Our wholesale transaction volume was 2,289 units in the second quarter, up 88% year-over-year and 36% sequentially. The total wholesale revenue was RMB 37.4 million. Combining both retail and wholesale, total revenue for the quarter reached RMB 1.51 billion, up 75% year-over-year and 7% sequentially.

During the second quarter, auto prices, particularly prices for new ICE cars, underwent a rapid adjustment over a relatively short period which had a direct impact on the gross margin of our existing inventory. We also proactively accelerated the sell-through of cars affected by these price fluctuations. As a result, our gross margin fluctuated significantly during the quarter, reaching negative 0.7% compared with 5.2% in the same period last year and 7% in the previous quarter.

With the earlier inventory reset now largely complete and inventory turnover further accelerating we have achieved a more stable and efficient balance between procurement and sales. Since the beginning of the third quarter, our per unit profitability has recovered significantly, and we expect our overall gross margin to recover to above 6% in the third quarter.

Turning to expenses. We continue to maintain strict cost discipline despite the continued expansion of our business and superstore network. Our sales and marketing expenses remained broadly stable during the quarter. Adjusted EBITDA loss was RMB 120 million, primarily reflecting the temporary impact of the lower gross margin.

Moving to our outlook for the third quarter. We are accelerating inventory turnover while maintaining a prudent inventory procurement strategy. We expect retail transaction volume to be between 20,500 and 21,000 units with total revenue between RMB 1.16 billion and RMB 1.19 billion, and gross margin recovering to above 6%. As our gross margin recovers and operating efficiency improves, we expect our profitability to improve further.

Finally, I would like to provide an update on our financing. We recently received $4 million in investment proceeds from NIO Capital and the closing of the remaining $4 million investment is proceeding as planned. NIO Capital has confirmed that it will proceed with the remaining investment at $2.86 per ADS. Meanwhile, NIO Capital is also actively advancing the overseas direct investment or ODI filing process for its investment in the company.

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

[Operator Instructions] [Interpreted] We received 3 questions from investors. The first question is Uxin has further shortened its inventory turnover from approximately 30 days to around 20 days. Could management discuss how you have been able to achieve such rapid turnover. Is this primarily the result of proactively to the current market environment? Or is this an operating level you expect to maintain over the long term?

[Interpreted] Thank you for the question. There are several factors behind our ability to shorten inventory turnover from approximately 30 days to around 20 days. First, we have been applying AI across our operations. A range of technology capabilities we have developed and upgraded are gradually being deployed across key areas such as pricing, price adjustments and risk controls. The accuracy, coverage and response speed of our pricing capabilities have continued to improve, and we're already seeing a meaningful improvement in inventory turnover efficiency.

Second, we have further integrated our end-to-end operating system. We continue to upgrade our core systems across inspection and reconditioning, inventory management and CRM using technology to improve our assessment of car conditions, market demand and customer needs and to increase the efficiency of car matching and transactions. As these different parts of our operations become more closely connected, the overall efficiency from procurement through sales has also improved.

The longer a used car remains in inventory, the greater the price risk we assume. Faster turnover significantly reduces our risk exposure and help limit inventory impairment losses when the market fluctuates. Therefore, when viewed across a full operating cycle, faster turnover does not come at the expense of per unit profitability. Instead, it helps us achieve more stable and healthier overall per unit profitability. At the same time, faster turnover allows the same amount of inventory capital and the same workforce to support a larger sales volume. As workforce and capital efficiency continue to improve, we also expect to unlock greater operating leverage.

So for us, inventory turnover of around 20 days is not a short-term defensive strategy. It is a core operating target that we intend to maintain over the long term.

[Interpreted] The second question is the automotive market experienced a significant adjustment in the second quarter. Could management share what you have been seeing recently in terms of used car market conditions and the competitive landscape? How do you view the industry outlook for the remainder of 2026?

[Interpreted] Thank you for the question. Based on recent market performance, overall auto consumption remains relatively weak. Nationwide passenger vehicle retail sales declined by more than 20% year-over-year in both July and August, with ICE car retail sales down approximately 40%. This pressure has also carried over into the used car market. Nationwide used car transactions declined by 6% year-over-year in July and by 11% in August.

On pricing, we believe the most severe adjustment occurred in the second quarter. New car prices, particularly prices for ICE cars declined rapidly over a relatively short period, which had a significant impact on used car prices. Since the beginning of the third quarter, the market has remained under some pressure, but we have not seen the kind of sharp monthly declines that occurred in the second quarter. Overall market conditions are gradually stabilizing.

At the same time, industry consolidation is continuing. Nearly 30,000 brick-and-mortar used car dealerships exited the market in the first half of this year, and we expect 50,000 to 60,000 dealerships to exit the market for the full year, representing more than 20% of the industry. We believe this market adjustment will accelerate the reshaping of the industry with market share becoming increasingly concentrated among companies with scale, standardized operations and digital capabilities.

For us, this also creates an opportunity to gain market share. We have maintained a relatively prudent approach to inventory procurement in the third quarter while shortening inventory turnover to around 20 days. At the same time, we expect our retail transaction volume to continue growing by nearly 50% year-over-year, significantly outperforming the broader industry.

The fourth quarter is typically a peak season for the used car market. Our current view is that market volatility is unlikely to be as severe as it was in the second quarter. Although risks remain. We will, therefore, adjust our inventory levels prudently based on market conditions. As prices stabilize further, we will accelerate inventory procurement. As volatility persists, we will continue to maintain rapid inventory turnover and drive sales growth through faster inventory -- through fast turnover and greater capital efficiency to reduce the impact of price fluctuation. That's my answer.

[Interpreted] The third question is the company previously announced a plan by the CEO to purchase additional company shares. Could management provide an update on the execution of this plan?

[Interpreted] Thank you for the question. Over the past few years, we have validated our warehouse-style superstore model and began expanding our footprint nationwide. Our sales volume, operating efficiency and core capabilities have all continued to improve. I believe the company is moving in the right direction. Given the recent performance of our share price, I decided to use my own funds to purchase additional Uxin's shares in the open market as a tangible demonstration of my confidence in the company's long-term value.

As previously announced, an entity controlled by me established a Rule 10b5-1 trading plan on June 30 and to purchase up to $5 million of the company's ADS at a price of no more than $2.85 per ADS. Following the required 90-day cooling-off period, purchases under the plan will be eligible to begin on September 28.

The timing and pace of purchases will be determined in accordance with the preestablished trading plan and will strictly comply with Rule 10b5-1 and other applicable securities trading rules. The actual amount that can be purchased on any given date will also be subject to factors such as the recent trading volume of the company's ADS. As a result, the purchases will be carried out gradually over time.

I remain highly confident in the company's long-term development. Through these purchases, I also hope to further align my personal interest with the long-term interest of the company and of our shareholders. That's my answer. Thank you.

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

Thank you again for joining today's call and for your continued support in Uxin. We look forward to speaking to you again soon.

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

[Portions of this transcript that are marked [interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the quarter ended March 31, 2026. [Operator Instructions] 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. [ Ali Wang ]. Please go ahead, [ Ali ].

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the first quarter ended March 31, 2026. On the call with me today, we have D.K., our Founder and CEO; and John Lin, our CFO. D.K. 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, D.K. Please go ahead, sir.

[Interpreted] 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 both Chinese and English.

In the first quarter of 2026, our business continued its strong growth momentum despite the seasonal impact of the Chinese New Year holiday on used car sales, retail transaction volume reached 16,530 units, representing a 119% year-over-year increase. This marks the eighth consecutive quarter in which our retail transaction volume grew by more than 110% year-over-year. While sustaining rapid sales growth, we maintained inventory turnover at approximately 30 days and gross margin was 7.7%, remaining stable overall compared with the previous quarter. Our Net Promoter Score further improved to 68 during the quarter and remained above 65, continuing to rank among the highest in the industry.

The recent developments in China's automotive market have attracted considerable attention from investors, and I would like to share some of my observations since the beginning of 2026 China's auto market has indeed experienced a slowdown. Cumulative new vehicle sales declined by 20% year-over-year during the first 5 months with internal combustion engine or ICE vehicle sales facing even greater pressure. In both April and May, new ICE vehicle sales fell by more than 35% year-over-year. The used car market also saw significant price adjustments starting in April, with prices of mainstream used ICE vehicles declined by 10% to 15% within 1 to 2 months. Under such market conditions, used car retailers must meet much higher requirements and pricing, inventory turnover, capital efficiency and risk management.

Although declining vehicle prices have created short-term pressure on profitability, China's used car market still achieved a modest 2% increase in transaction volume during the first 5 months of the year, significantly outperforming the new vehicle market. Consumer acceptance of used cars in China continues to improve. In particular, following fluctuations in new car pricing and the rapid adjustment in residual values of ICE vehicles, high value for money used vehicles are expected to become even more attractive to consumers.

Looking at a longer-term perspective, the United States experienced a similar cycle during the global financial crisis from 2007 to 2009. Cumulative new vehicle sales declined by roughly 35% during that period and many new car dealerships and used car retailers went out of business. However, leading independent used car retailers emerged stronger from the downturn, delivering years of sustained growth in sales volume, profitability and market share.

Therefore, we believe that industry adjustments often lead to a reshaping of the competitive landscape. Once the current volatility in China's automotive market eases, the country's large vehicle ownership base, the still low level of used car transactions relative to vehicle ownership compared with developed markets and consumers' growing demand for affordable, high-quality vehicles will continue to support the long-term growth of the used car industry. We are highly confident that our superstore model built over the past several years on disciplined inventory turnover, stringent quality control and superior customer service will further strengthen our competitive advantages during this period of industry adjustment and position Uxin to emerge as the biggest winner from the transformation of China's used car retail industry.

In addition, our Tianjin Superstore officially commenced operations in March. As our first project in North China, the superstore can accommodate more than 3,000 vehicles for display and sales. With the opening of the Tianjin Superstore, we now operate 6 superstores nationwide. Furthermore, we recently announced strategic partnerships with the municipal governments of Tianjin and Shijiazhuang to jointly invest in and operate used car superstores.

As our nationwide superstore network continues to expand, we expect our service coverage, regional synergies and brand influence to further strengthen, reinforcing our leadership in China's used car retail market. Looking ahead to the second quarter, we expect retail transaction volume to exceed 18,000 units, continuing our strong growth trajectory. At the same time, we reaffirm our target of achieving more than 100% year-over-year growth in retail transaction volume for the full year of 2026.

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

[Interpreted] Thank you, D.K., and hello, everyone. I will now walk you through our financial results for the quarter. The first quarter is traditionally a slower season for used car sales due to the Chinese New Year holiday. Nevertheless, our business continued to deliver strong performance during the quarter. Retail transaction volume reached 16,530 units, representing a 119% year-over-year increase. Sales volume at our existing superstores continue to ramp up, while new superstores gradually commence operations. We expect our retail transaction volume to maintain a strong growth trajectory over the coming quarters.

Retail vehicle sales revenue totaled RMB 1.01 billion, up 118% year-over-year and down 10% sequentially. The significant increase in retail transaction volume was the primary driver of the year-over-year growth in retail revenue. The average selling price or ASP of retail vehicles was RMB 61,000 compared with RMB 59,000 in the previous quarter and RMB 62,000 in the same period last year, remaining generally stable.

Turning to our wholesale business. Our wholesale transaction volume was 1,681 units in the first quarter, representing a 134% year-over-year increase and a 32% decline sequentially. Total wholesale revenue was RMB 27.9 million. Combining both retail and wholesale, total revenue for the quarter reached RMB 1.074 billion, up 113% year-over-year and down 10% sequentially.

Gross margin for the quarter was 7%, remaining at a relatively stable level. This represented a 0.2 percentage point increase from 6.8% in the prior quarter and remained consistent with 7% a year ago. In general, newly opened superstores naturally operate at lower gross margin levels than our more mature locations. However, the larger sales contribution from our mature superstores offset this impact and help maintain a stable overall gross margin.

Adjusted EBITDA loss for the quarter was RMB 34.3 million compared with RMB 27.2 million in the previous quarter. The sequential increase was primarily attributable to the seasonal impact of the Chinese New Year holiday on sales volume. Compared with the same period last year, adjusted EBITDA loss increased by roughly RMB 25 million mainly because our newly opened superstores are still in the early stages of ramping up operations, and we also made upfront investments in staffing to support our future superstore expansion plan.

Looking ahead to the second quarter of 2026, we expect retail transaction volume to be between 18,000 and 19,000 units representing year-over-year growth of 73% to 83%. We expect total revenue, including retail vehicle sales revenue, wholesale vehicle sales revenue and other revenue to be between RMB 1.05 billion and RMB 1.1 billion.

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

[Operator Instructions] And today's first question comes from Bin Wang with Deutsche Bank.

[Interpreted] My question is about the second quarter. So why in the second quarter, the new car price start to decline and the used cars start to decline as well, why second quarter is not the [ first ] quarter? And secondly, because [indiscernible] mentioned about the pressure in the second quarter, what's roughly gross margin change in the second quarter will [indiscernible]

[Interpreted] This is John. I'll take your questions. The overall -- the overall vehicle sales volume in China from January to March is in line with our expectation. And since starting from April to May, ICE vehicles saw a 35% drop in sales volume. And used cars started to see a 10% to 15% drop starting April. So this is why we are seeing a drop in the second quarter.

Since April, we have seen rapid price adjustments in the new car market, particularly for ICE vehicles. This has also pressured gross margin across the used car industry. Under such volatile market conditions, we have become more cautious in our operations. We will prioritize healthy inventory turnover over short-term gross margin optimization. And as a result, gross margin will face greater pressure in the second quarter.

If ICE vehicle prices continue to decline significantly from current levels, our gross margin will remain under pressure. However, based on what we have seen since early June, new car prices have generally stabilized. Given our fast inventory turnover, inventory affected by earlier price volatility is being gradually cleared. As a result, we expect gross margin to improve meaningfully in the third quarter and potentially return to normal levels.

And our next question today comes from Wenjie Dai with SWS Research.

[Interpreted] Okay. As we can see, the company has been accelerating its store expansion this year. Could management elaborate on how the operating performance of newly opened superstores compares with that of the Xi'an Superstores when it first opened, specifically such as sales ramp-up, revenue growth and profitability involve that superstores model matured.

[Interpreted] Thank you for the question. This is John. I'll take your question. Xi'an was our first superstore and officially commenced operations in December 2022. At that time, we were still building and validating the entire superstore operating model, including vehicle sourcing, pricing, reconditioning, inventory management, sales conversion and customer service. Now the Xi'an Superstore is in a much more mature stage. Last year, its monthly retail transaction volume peaked at 2,700 units, representing roughly 25% local market share, and it has already achieved profitability at the store level.

What we have clearly seen is that with several years of operating experience, the ramp-up period for new superstores has become significantly shorter, take Wuhan and Zhengzhou as examples. The Wuhan Superstore opened in March 2025 and its monthly retail transaction volume exceeded 1,000 units within about 6 months. The Zhengzhou Superstore opened in September 2025 and its monthly retail transaction volume surpassed 1,000 units in about 4 months. Zhengzhou is particularly encouraging because it's both highly competitive and highly active used car markets. Achieving that level of sales growth within such a short period demonstrates that our model is becoming increasingly scalable and replicable across different cities.

This improvement is driven by several factors. First, our procurement, pricing and inventory management systems have become much more mature, allowing us to establish the right inventory mix for each local market more quickly. Second, our sales and operations teams have become much more standardized, allowing new superstores to replicate operating practices that have already been proven successful. Third, as the Uxin brand continues to gain recognition new superstores are able to attract customers and build trust much faster than in the early days.

In addition, our site selection and project evaluation capabilities have improved significantly. We are also benefiting from the current real estate market environment, which helps us secure better locations for new superstores. From a revenue perspective, faster sales ramp-up naturally drives faster revenue growth. From a profitability perspective, new superstores still require upfront investments in facilities and staffing so profitability typically lags sales growth. However, as sales volume scales up, inventory turnover stabilizes, gross margin increases and operating efficiency improved new superstores will gradually move closer to the performance levels of mature locations.

Overall, the Xi’an Superstore proved that the single-store model can achieve profitability, while the Wuhan and Zhengzhou Superstores demonstrate that the model is becoming increasingly efficient to replicate across new markets. As we continue opening new superstores, we will closely monitor sales ramp-up, gross margins, inventory turnover and store-level EBITDA to ensure that our expansion remains high quality and sustainable.

And our next question comes from with [ Xin Xin Lee ] with CMS.

[Interpreted] We noticed that the company has recently announced a number of strategic partnerships with local government. Could you provide more color on your store opening plans for this year? Also, if market conditions do not improve, would the company consider slowing down the pace of new store opening?

[Interpreted] Thank you for your questions. This is D.K., I will take your questions. Regarding our expansion plan, we expect to open 4 to 6 new superstores in 2026. The Tianjin Superstore officially commenced the operations in March, and it is our first project in North China. We have also announced projects in Chongqing, Shijiazhuang, Yinchuan, Wuxi and Guangzhou.

At the same time, we're in discussions with a number of other local governments across China regarding future cooperation opportunities. These projects are at different stages of development. Some are approaching trial operations while others are still in the facility preparation, team building and inventory sourcing stated.

As for market conditions, we have certainly seen volatility in both new and used vehicle prices this year, which creates short-term pressure across the industry. However, industry adjustments also tend to accelerate consolidation. For companies with strong inventory turnover, pricing capabilities, standardized reconditioning processes and trusted customer service, periods like this can create opportunities to gain market share.

Therefore, we will not change our long-term strategy of nationwide expansion because of short-term market volatility. At the same time, we will remain flexible and disciplined in execution. If market conditions remain challenging, we may take a more conservative approach to the pace of new store openings, inventory ramp-up and operating expenses. Our priority will remain cash efficiency, inventory turnover and store level operating quality.

At this point, our plan to open 4 to 6 new superstores this year remains unchanged. Our target of achieving more than 100% year-over-year growth in retail transaction volume for 2026 also remains unchanged. We will continue to manage the rollout of each project based on market conditions and ensure that our expansion remains high quality and sustainable.

And our next question today comes from [ Zal George ] with TF Securities.

[Interpreted] We have seen growing divergence between the performance of the [ ads ] vehicles and [ NEVs ] in the new car segment this year. Are you seeing similar trends in used car sales?

[Interpreted] This is D.K., I'll take your question. Overall, China's auto market has been under pressure this year. Taking May as an example, passenger vehicle sales declined by nearly 22% year-over-year. Within that, ICE vehicle sales fell by 39%, while NEV sales declined by 7.5%. While NEV sales also declined, the decline was much less severe than that of ICE vehicles. As a result, NEV retail penetration exceeded 60%.

The used car market is fundamentally built on vehicle ownership and the supply of used cars is closely tied to the ownership structure. Based on what we have seen over the past several months and in the market today, used ICE vehicles have been affected primarily by pricing pressure. However, from an overall sales mix perspective, we have not seen a meaningful increase in the share of NEVs in the used car market. The reason is quite simple. NEVs still account for less than 15% of total vehicle ownership in China.

What really drives the used car market is pricing. Unlike the new car market, used cars can continuously adjust their prices to restore their value proposition for consumers. In our view, the current market correction is actually a very important sign that China's auto market is becoming more mature. Used car prices have fallen sharply during this cycle. But in many ways, this adjustment represents a onetime reset in residual value. The residual value of a 3-year-old used vehicle in China measured against current new vehicle prices used to be around 68% to 72%. Today, that figure has declined to roughly 58% to 60%, down 10 percentage, bringing it much closer to levels seen in mature markets such as the United States, Europe and Japan.

Globally for used cars to fully demonstrate their value for money advantage, residual values need to return to more reasonable levels. Once this pricing adjustment is completed, we expect not only more trade-ins for new vehicles, but also a growing number of used-for-used replacement purchases. Most vehicle purchases driven by practical needs will be satisfied by used cars, and China's used car market will move closer to the supply and demand dynamics seen in mature markets.

And that concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Thank you again for joining today's call and for your continued support in Uxin. We look forward to speaking to you again soon in the future.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the quarter ended December 31, 2025. [Operator Instructions] 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. [ Ali Wang ]. Please go ahead, [ Ali ].

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the fourth quarter and full year ended December 31, 2025. On the call with me today, we have D.K., our Founder and CEO; and John Lin, our CFO. D.K. 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 will turn the call over to our CEO, D.K. Please go ahead, sir.

[Interpreted] Good day to everyone, and thank you for your continued interest and support. It's a pleasure to welcome you on our earnings call today. To better communicate with our domestic and international investors, I will be discussing our performance over the last year as well as providing insights into our prospects in both Chinese and English.

China's vehicle ownership has approached 370 million units, forming a large and growing base that continues to unlock significant potential for vehicle recirculation. In 2025, used car transaction volume in China exceeded 20 million units for the first time, accounting for approximately 5.5% of total vehicle ownership, well below the 10% to 15% level typically seen in more mature markets. As such percentage rises towards that level, annual used car transaction volume could reach 35 million to 50 million units based on current vehicle ownership alone.

Consumer expectations for products, services and overall experience in the used car industry continue to rise. We have observed that they are no longer satisfied with availability alone and increasingly value transparency and vehicle conditions, fare pricing, professional service and reliable after-sales support. We believe that in the trillion RMB market, which remains at an early stage of development, those who can systematically address these pain points will be well positioned to lead the transformation and upgrading of China's used car industry.

Against this backdrop, Uxin is redefining used car transactions through a modern retail approach. We leveraged our advanced self-operated reconditioning factory to ensure vehicle quality and provide a one-stop purchasing experience and comprehensive after-sales support through our off-line superstores and online marketplace. As a result, buying and selling used cars could become a simple, transparent and trustworthy as purchasing standardized retail products.

In 2025, despite continued intense price competition in the new car market, which created challenges for the used car industry, our business maintained strong growth momentum. Our full year retail transaction volume reached 51,110 units, up 135% year-over-year, marking the second consecutive year of more than 130% growth. Total revenues reached RMB 3.24 billion, representing a 79% increase year-over-year. Meanwhile, as both inventory and sales continue to scale up, our inventory turnover days for vehicles available for sale remained stable at approximately 30 days.

During the year, we also began large-scale replication and nationwide expansion of our superstore model. Building on our existing superstores in Hefei and Xi'an, we opened 3 new superstores in Wuhan, Zhengzhou and Jinan, establishing a scalable operating system that can be replicated across regions. Our mature superstores in Xi'an and Hefei continued to ramp up, each achieving over 20% market share in their respective cities. Wuhan as the first replicated superstore after our model has been validated, delivered stronger sales growth and profitability than our earlier superstores at the same stage. Zhengzhou and Jinan superstores further improved upon Wuhan's performance.

These achievements are supported by core capabilities that we have built over time and continue to strengthen. First, our pricing capability continues to evolve. We have accumulated the industry's largest set of real transaction data from our self-operated used car sales, and this data continues to grow, roughly doubling each year. This enables our pricing model to become increasingly precise. Our digital systems respond rapidly to market changes, allowing us to maintain real-time pricing competitiveness on both sourcing and sales. As a result, we are well positioned to navigate industry volatility and systematically improve vehicle-level profitability while sustaining high inventory turnover efficiency.

Second, we have built an innovative integrated factory warehousing retail business model. Each of our superstores is supported by a used car reconditioning factory forming China's largest, most advanced and most efficient supply system for high-quality used vehicles. We have established scalable advantages over traditional dealers in quality control, reconditioning efficiency and cost optimization. Leveraging the reconditioning capabilities at our self-operated factories, we have expanded the used car service value chain and are able to provide full life cycle vehicle services, including financing, insurance, extended warranties, accessories and repair and maintenance services, similar to those offered by new car dealers. Compared with traditional used car dealers that primarily offer financing services, our revenue streams are more diversified with greater potential for profitability improvement.

Meanwhile, most of our superstores carry inventory of more than 2,000 vehicles and serves as a landmark used car retail destination in its local market. Landmark superstores help build customer trust. Through our in-store service, vehicle display and experience design, customers can enjoy a professional, transparent and trustworthy retail experience at our superstores. Our Net Promoter Score has reached 67 and customer satisfaction and brand reputation remain at industry-leading levels. We believe that our sales conversion efficiency, together with our ability to generate organic traffic through a strong word of mouth provides us with significant advantages over traditional used car dealers.

We clearly see that Uxin is advancing rapidly along a validated and continuously strengthening development path. Looking ahead to 2026, we will continue to increase inventory and sales across our existing 5 superstores, and we plan to open 4 to 6 additional superstores during the year, further strengthening our nationwide network. Based on these plans, we expect both our full year retail transaction volume in 2026 and revenue to grow by more than 100%. The modernization of China's used car industry has only just begun, and Uxin is positioned to benefit from a significant market opportunity. We also recognize that truly sustainable growth is not simply about speed, but is built on the coordinated improvement of scalability, operational efficiency and customer value. We will remain focused on delivering better products and more professional services to our customers while driving higher standards for solutions across the industry and creating long-term value for our shareholders.

Once again, thank you for your trust and support. With that, I'd like to turn the call over to our CFO to walk you through the financial results. John, please.

[Interpreted] Thank you, D.K., and hello, everyone. I will now share an update on our financial performance.

We delivered another quarter of strong results in the fourth quarter of 2025. Retail transaction volume reached 19,160 units, representing a 37% sequential increase and a 124% increase year-over-year, significantly outperforming the overall China used car market, which recorded a year-over-year growth rate of approximately 6% during the same period. This demonstrates that our retail business remains firmly on a path of rapid growth.

Total retail revenue for the quarter was RMB 1.129 billion, up 38% sequentially and 104% year-over-year. Our average selling price or ASP for retail vehicles decreased from RMB 65,000 in the same quarter last year to RMB 59,000 this quarter, but slightly increased from RMB 58,000 in the last quarter. While ASP declined as we shifted toward a more affordable inventory mix, the strong growth in transaction volume largely offset the pricing impact and supported 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.

On the wholesale side, we sold 2,474 units in the fourth quarter, up 31% sequentially and 180% year-over-year. Wholesale revenue for the quarter was RMB 38.2 million. Combining retail and wholesale operations, total revenue for the fourth quarter was RMB 1.198 billion, representing a 36% sequential increase and a 101% year-over-year increase. Our gross margin for the fourth quarter was 6.8%, down 0.7 percentage points from 7.5% in the last quarter. This was primarily due to promotional activities in the new car market during the fourth quarter, which put pressure on profitability across the used car industry. In addition, we opened a new superstore in Zhengzhou in September and another in Jinan in December. And newly opened superstores typically operate at lower gross margins during the early stages of ramp-up.

Operating expenses also increased during the quarter, primarily due to the initial ramp-up of our new super stores, including investments in staffing and infrastructure. As a result, our adjusted EBITDA loss was RMB 27.2 million.

Turning to our full year 2025 results. Retail transaction volume totaled 51,110 units, representing a 135% year-over-year increase. Full year retail revenue was RMB 3.021 billion, up 19% year-over-year. Total revenue reached RMB 3.24 billion, an increase of 79% year-over-year. In 2025, we opened 3 new superstores in Wuhan, Zhengzhou, and Jinan, marking a new phase of rapid nationwide replication and expansion. These new superstores have ramped up more quickly than our earlier locations, continuing to drive growth in both our sales volume and overall financial performance. Gross margin for the full year was 6.7%, remaining stable compared with last year despite lower margins during the early ramp-up stages of newly opened superstores. This continued improvement in profitability from our mature superstores enabled us to maintain stable margins while expanding rapidly.

Turning to expenses. SG&A and R&D expenses totaled RMB 450 million, representing 13.9% of total revenue, a significant improvement from 24.3% last year, reflecting meaningful progress in cost control and operating leverage. Adjusted EBITDA loss for the full year was RMB 57.9 million, narrowing by 28% year-over-year. Adjusted EBITDA margin was minus 1.8%, an improvement of 2.7 percentage points from last year. We have disclosed additional details regarding our full year financial performance and our recently published fourth quarter and annual results. So I will not repeat all the figures here.

Turning to our outlook for the first quarter of 2026. While the first quarter is traditionally a seasonally soft period for the used car industry due to the Chinese New Year holiday, we expect retail transaction volume to be between 16,200 and 16,500 units, representing year-over-year growth of over 110%. Total revenue is expected to be between RMB 1.05 billion and RMB 1.07 billion. Lastly, to reiterate D.K.'s comments on our full year outlook. In 2026, we plan to open 4 to 6 new superstores with sales volume and inventory continuing to ramp up at our existing superstores, along with new store openings, we are confident in achieving over 100% year-over-year growth in both retail transaction volume and revenues in 2026.

This concludes our prepared remarks today. Operator, we're ready for questions.

[Operator Instructions] The first question today comes from Dai Wenjie with SWS.

[Interpreted] My first question is the company delivered another quarter of strong growth in both sales volume and revenue. Management also provide some color on the changes in gross margin. So as you plan to open 4 to 6 new superstores in this year, how should we think about the gross margin going into 2026 and ASP? Could management share your latest view on used car pricing trends this year? Are you starting to see some signs of stabilization?

[Interpreted] Thank you for the question. Let me take this one. Okay. It's John. Gross margin declined sequentially in the fourth quarter, mainly due to the ramp-up of newly opened superstores. We opened our Zhengzhou superstore in September and our Jinan superstore in December. During the initial ramp-up phase, we adopt a more competitive pricing strategy to drive traffic and establish market presence, resulting in a narrower spread between sourcing costs and selling prices compared to our mature stores.

In addition, the penetration of value-added services also takes time to ramp up as our market share and brand recognition improve in these markets. It generally takes around 6 to 9 months for new stores to reach the gross margin level of our mature stores. At the same time, our new car market experienced a slowdown in sales last December and dealers stepped up promotional activities, which put pressure on used car margins. According to our operating data for the first quarter of 2026, we have already seen meaningful improvement in the gross margins of our newly opened superstores in Zhengzhou and Jinan. Overall gross margin has begun to recover compared to the fourth quarter of 2025, and we expect it to return to above 7%.

Regarding ASP, according to data from the China Automobile Dealers Association, the national average transaction price of used cars has started to recover since the fourth quarter of last year. We're seeing a similar trend in our own operating data. Our retail ASP increased sequentially for 2 consecutive quarters, reaching RMB 59,000 in the fourth quarter of 2025, and we expect it to exceed RMB 61,000 in the first quarter of 2026. In addition, due to factors such as rising raw material costs, the phaseout of purchase tax incentives and government subsidies as well as regulatory guidance aimed at reducing excessive price competition, we expect new car pricing to become more stable in 2026 compared with the past 3 years. More stable new car pricing will also support used car prices.

As a result, we expect our retail ASP to show a stable to upward trend in 2026 compared with 2025. Given that we expect retail transaction volume to grow by over 100% year-over-year in 2026, revenue growth is expected to outpace transaction volume growth. That's my answer. Thank you.

The next question comes from Fei Dai with TF Securities.

[Interpreted] I have a question on customer acquisition. How should we think about the customer acquisition channels for new superstores compared with your mature stores? Are there any key differences?

Thank you for the question. Let me address your question. Customer acquisition for new superstores mainly comes from 3 channels. First, Uxin is a well-recognized brand in China's used car market. As a result, whenever we enter a new city, we already have a certain level of traffic accumulation on the Uxin Used Car app in that market. This is a key difference compared with many regional dealers. In other words, during the initial ramp-up phase of a new superstore, we are able to leverage our existing brand awareness and online traffic base to reactivate and reengage existing users, bringing in the first batch of users and leads into the new market.

Second, we typically carry out a series of marketing and PR campaigns around new superstore openings. In addition to targeted marketing on digital platforms, we also collaborate with local governments when launching new superstores. Local governments often provide promotional resources and local media support, which helps us quickly build awareness and reach potential customers in the new market. Third, we also partnered with vertical automotive platforms and media to capture traffic and leads from third-party channels. Given the competitiveness of our vehicle quality and pricing, we are able to achieve strong exposure and conversion on these platforms.

As the new stores continue to operate and mature in local markets, the cities where our superstores are located to gradually become destination markets for car purchases and walking traffic increases over time. At the same time, as transaction volume scales up, customer distraction and brand reputation continue to build. And referrals from existing customers also increased, further improving conversion and creating a positive customer acquisition cycle. Service quality and customer experience continues to increase, and our customer acquisition costs continue to decline. That's my answer. Thank you. .

The next question comes from [ Shinjing Li ] with China Merchant Securities.

[Interpreted] Congratulations on entering a new phase of nationwide expansion. From a long-term perspective, could management share some color on your store expansion potential across China and how many stores do you think you can ultimately roll out over time?

Thank you for the question. Let me take this one. As of the end of 2025, we had 5 superstores in operation. In March this year, we opened a new superstore in Tianjin. We expect to open 4 to 6 superstores in 2026 with a goal of having more than 10 stores in operation by the end of 2026.

We are very confident in our long-term store expansion potential across China, primarily because of the sheer size of the used car market. China's vehicle ownership has already exceeded 350 million units. And on top of this large base, there are many cities that are well suited for deploying Uxin's large-scale used car superstores. Our assessment of store expansion potential is mainly based on the level of vehicle ownership in each city as well as our target market share. At a high level, for a city with vehicle ownership of 500,000, we believe it can support Uxin superstore with around 1,000 units of inventory, assuming 10% to 15% of vehicle ownership is transacted as used cars annually, such a city would generate annual used car transactions of approximately 50,000 to 80,000 units. Based on the over 20% market share that our mature stores have already achieved a Uxin superstore could achieve annual sales of over 10,000 units, which corresponds to an inventory level of around 1,000 units.

Applying this framework today, there are more than 30 cities in China with vehicle ownership exceeding 3 million, which can support super stores with over 5,000 units of inventory. There are more than 70 cities with vehicle ownership exceeding 1 million, which can support superstores with over 2,000 units of inventory. In addition, there are more than 100 cities with vehicle ownership exceeding 500,000, which can support superstores with over 1,000 units of inventory. In the long run, we believe there are more than 200 cities across China where we can potentially operate supporting annual retail transaction volume of over 3 million units. Thank you. That was my answer.

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

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

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the quarter ended September 30, 2025. [Operator Instructions] 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. [indiscernible]. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the third quarter ended September 30, 2025. On the call with me today, we have D.K., our Founder and CEO; and John Lin, our CFO. D.K. 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, D.K. Please go ahead, sir.

[interpreted] 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.

In the third quarter of 2025, we continue 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 6 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 3 years.

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 3 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 3 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 5 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. 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 4 to 6 additional superstores in 2026, marking a transition into a phase of accelerated nationwide expansion for our business.

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 3 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 reached maturity faster and losses during the early ramp-up phase are more predictable and better controlled.

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%.

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

Okay. Thank you, D.K.

[interpreted] Hello, everyone. I will continue to present the company's performance in both Chinese and English to better communicate with all of you. In the third quarter, our retail transaction volume reached 14,020 units, representing a 134% increase year-over-year and a 35% increase quarter-over-quarter. Sales at our existing superstores continues to grow, whilst 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. 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 58,000 compared to RMB 59,000 in the prior quarter and RMB 74,000 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.

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.

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 3 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 start-up phase with margin performance continuing to ramp up and driving a meaningful lift to this quarter's gross margin. 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.

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%.

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

[Operator Instructions] The first question today comes from Wenjie Dai with SWS Research.

[interpreted] Congratulation and now we see gross margin reached 7.5% this quarter, 3 years high. How does management view the sustainability of the current margin level? And what factors could further drive margin improvement going forward?

[interpreted] This quarter's gross margin was 7.5%, representing a new high since we transitioned to the self-operated model, and there are 2 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 2 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.

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 D.K. 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. 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.

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. That's my answer. Thank you.

The next question comes from Fei Dai with TF Securities.

[interpreted] My first question is following the opening of the Zhengzhou Superstore, both sales and profitability ramp 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?

[interpreted] Thank you for your question. Our Zhengzhou Superstore has only been operating for about 3 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 is 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.

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 support stronger profitability in the early stages of operation.

Standard new superstore with a planned capacity of approximately 3,000 vehicles, our current expectation is that it reaches breakeven in about 9 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. That's my answer. Thank you.

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

[interpreted] 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. Starting with the differences, the biggest distinction is the sales channel. Carvana sells online, while Uxin operates through both offline superstores and then 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 the household assets, so people make purchase decisions more cautiously. As a result, many consumers still want an in-store experience and a test driver 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.

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. Second, given that used cars are a highly nonstandardized product, both Carvana and Uxin focused 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 units 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.

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.

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 4 to 5 years. That's all I wanted to share. Thank you.

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 has now concluded. Thank you for attending today's presentation. You may now disconnect.

[Portions of this transcript that are marked [interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the quarter ended June 30, 2025. [Operator Instructions] Today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to your host for today's conference call, Ms. Ellie Wang. Please go ahead, Ellie.

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the second quarter ended June 30, 2025. On the call with me today, we have D.K., our Founder and CEO; and John Lin, our CFO. D.K. 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 will turn the call over to our CEO, D.K. Please go ahead, sir.

Hello, everyone, and thank you for joining our earnings conference call. To ensure smooth communication with both our domestic and international investors, I will share our latest updates in both Chinese and English.

In the second quarter of 2025, we delivered another strong set of results. Retail transaction volume reached 10,385 units, up 154% year-over-year. This marks the fifth consecutive quarter with year-over-year growth above 140%, underscoring the strong and sustainable growth potential of our model. Inventory turnover also remained healthy at roughly 30 days, reflecting our efficient operations and a balanced inventory structure. On customer satisfaction, our Net Promoter Score was 65 this quarter, maintaining the highest level in the industry for 5 consecutive quarters.

Over the past few years, we have built a standardized management and operating system in our flagship superstores in Xi'an and Hefei. This framework enables new locations to ramp quickly and efficiently. Our Wuhan super store, which opened at the end of February, has performed well above expectations in both business ramp-up and operational maturity.

The one-stop used car experience offered by our large-scale superstore model has been warmly received by local consumers, starting with an initial retail inventory of 250 units in March. So Wuhan store has consistently sustained approximately 30-day inventory turnovers. By September, the store's retail transaction volume is expected to reach around 1,400 as this momentum continues to build.

On the sourcing side, our capabilities have been thoroughly tested and proven. We have integrated diverse vehicle acquisition channels, improved pricing precision and ensure smooth operations at our reconditioning facilities. Together, these strengths provide a stable, sufficient vehicle supply. As such, profitability at the Wuhan store is improving quickly alongside its rapid sales growth. Compared with our superstores in Xi'an and Hefei, start-up losses in Wuhan have been meaningfully smaller.

At the same time, the ramp-up of our Wuhan superstore has also enabled us to further improve our operational precision and enhance our superstore model. First, we have continued to improve the capabilities of our digital management system, drawing on real transaction data from daily operations to fine-tune our in-house engines for pricing, reconditioning and customer acquisition, allowing us to adapt more swiftly to evolving market conditions.

Second, we're continuously optimizing service workflows to ensure that even as our customer base expands rapidly, we remain firmly rooted in our core operating philosophy of delivering customer value. Third, we have also been refining our talent development framework to help new store employees build professional competence and service capabilities more quickly, supporting rapid business growth while preparing a solid talent pipeline for future expansion.

Additionally, we are actively exploring the integration of AI technologies into our business operations to unlock greater efficiency and scalability over time.

Our new store expansion is progressing steadily as planned. On September 27, we officially opened our Zhengzhou Superstore.

With a planned floor area of approximately 150,000 square meters, the facility can accommodate up to 5,000 vehicles on display and for sale. This is our fourth large-scale superstore following Xi'an, Hefei and Wuhan. Zhengzhou is a major transportation hub in Central China with a resident population of more than 13 million and over 5 million registered vehicles. The city ranks among the top 10 nationwide in used car transaction scale and activity, making it an ideal location for a large-scale superstore.

With this opening, we can serve more consumers in the region with high-quality vehicles and professional services while significantly strengthening our market presence in Henan province.

Looking at the industry, China's used car market has been heavily affected in recent years by aggressive price competition in the new car segment. We are encouraged that following a series of policy guidelines introduced by the Chinese government, competition in the new car market has moderated and the destructive price wars have effectively ended.

After 6 months of operation, our Wuhan Superstore has entered a phase of margin improvement. Looking ahead to the third quarter, we expect our retail transaction volume to remain on a strong growth trajectory with year-over-year growth of over 120% and a significant improvement in profitability. Based on the momentum across the first 3 quarters, we anticipate our full year 2025 retail transaction volume growth to reach approximately 130% year-over-year.

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

Thank you, D.K. Hello, everyone. Since we have both domestic and international investors participating today, we will continue to present the company's performance in both Chinese and English to better communicate with all of you.

In the second quarter, our retail transaction volume reached 10,385 units representing a 154% increase year-over-year and a 38% increase quarter-over-quarter, demonstrating that our retail business remains firmly on a path of rapid growth.

Retail revenue for the quarter totaled RMB 610 million, up 87% year-over-year and 31% quarter-over-quarter. The average selling price or ASP for retail vehicles was RMB 59,000 compared to RMB 62,000 in the prior quarter and RMB 79,000 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.

Turning to our wholesale business. Our wholesale transaction volume was 1,221 units in the second quarter, representing a 19% decrease year-over-year by the 70% increase quarter-over-quarter. Total wholesale revenue was RMB 29.9 million. Combining both retail and wholesale, total revenue for the quarter reached RMB 658 million, representing a 64% increase year-over-year and a 31% increase quarter-over-quarter.

Gross margin for the quarter was 5.2%, down 1.2 percentage points from 6.4% a year ago, and down 1.8 percentage points from 7% in the prior quarter. This decline was primarily due to the price war in the new car segment, which has exerted margin pressure on the used car market as well as the early stage ramp-up of our Wuhan super store, which opened in February and is still in the process of scaling its profitability. However, we do not expect these factors to impact gross margin in the third quarter, and we anticipate being a rebound to around 7.5%.

The increase in operating expenses this quarter was primarily related to the initial ramp-up of our Wuhan Superstore, including investments in staffing and infrastructure. As a result, our adjusted EBITDA loss for the quarter was RMB 16.5 million, representing a substantial 51% reduction year-over-year.

Looking ahead to the third quarter of 2025, we expect retail transaction volume to be in the range of 13,500 to 14,000 units, representing year-over-year growth of over 130%. Total revenue is expected to be between RMB 830 million and RMB 860 million with gross margin recovering to approximately 7.5%.

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

[Operator Instructions] And our first question today will come from Fei Dai of TF Securities.

Congratulations on the company's strong sales momentum and continued high growth trajectory. With new superstores opening at such rapid pace, how do you balance short-term profitability pressures with your expansion needs? Will you need additional financing?

Thank you for your question. Let me take this one. The rapid rollout and ramp-up of our new superstores significantly strengthened our market presence in the cities where we expand and also help us build out a nationwide sales network. This carries major strategic importance for us.

Now on balancing profitability with extension fee, I want to emphasize that we will never pursue extension blindly. Every new superstore is carefully planned, both from a business and financial perspective. That said, once a new store begins operation, there will be some short-term profitability pressure. To mitigate this, we are focused on raising the level of standardization and high-quality replication across stores. By further upgrading our digital management systems and improving organizational efficiency, we can reduce early-stage cost pressure and losses and accelerate the time to break even.

From a financial perspective, opening a new superstore requires about USD 8 million to USD 10 million, of which roughly $2 million is allocated to factory equipment and store preparation with the rest mainly for inventory buildup. Under our current operating model, it typically takes 2 to 3 years for a new superstore to reach breakeven and then maturity. Once matured, each store can generate enough profit to support the launch of another new store. Since our number of mature stores is still limited, we do plan to rely on measured incremental equity financing to support rapid expansion over the next 2 to 3 years.

Given that our business has consistently delivered over 100% year-over-year growth and that we are seeing early signs of recovery in capital markets, we are not overly concerned about funding. We are confident in our ability to raise sufficient capital in line with our expansion plan.

[Operator Instructions] Our next question today will come from Wenjie Dai of SWS Research.

The management mentioned earlier that the Wuhan Super Store has ramped up very successfully much faster than Hefei and Xi'an. Could you share what differentiation measures were taken in Wuhan?

Sure. Thank you for the question. This is D.K. I'll take this one. In addition to being the CEO of the company, I'm also the General Manager of the Wuhan Superstore. So I personally experienced the entire journey from preparation to selling our first car to achieving today's results.

I'd summarize the reasons in 3 areas. First, our digital business management system has been refined over more than 4 years of operations at the Xi'an and Hefei Super Stores. It is now highly mature and capable of being replicated quickly. These digital capabilities also benefit from a self-reinforcing flywheel effect, take our intelligent pricing system, for example, as powered by a vast database of real transaction data, something you can only truly accumulate if you're directly engaged in buying and selling vehicles yourselves. The more transactions we do, the more accurate our pricing becomes which in turn improves efficiency in both sourcing and sales. Thanks to the training of our Xi'an and Hefei data, this system has adapted very effectively in the Wuhan market.

Second, our business processes are now fully standardized and our organizational and talent development systems are increasingly well established. The management team at Wuhan brought rich experience, which helped avoid repeating unnecessary mistake, thereby accelerating both production and sales execution.

At the same time, the talent development cycle continues to shorten. Typically within 1 to 2 years of operations, each superstore is able to develop 1 to 2 new management teams to support future expansions.

That's my answer. We are confident that as we open more superstores, each new location will build upon and the proven experience of earlier ones, making operations smoother and more efficient over time.

Zhengzhou, our new superstar, you've just opened, how does management view the competitive landscape in Zhengzhou? Can the success in Wuhan be replicated there and the other new superstores?

The competitive environment in Zhengzhou is indeed intense, there are a number of dealers there with relatively advanced operating practices and some dealers have inventories of more than 500 vehicles. At the same time, Zhengzhou is a much larger market with a population of over 13 million and more than 5 million registered vehicles and is 1 of the most active used car trading hubs in China.

Currently, players in the market adopt different business models and target different positioning, our superstore model stands out with broader selection, better value for money, higher quality assurance and a more convenient one-stop service experience. On the customer side, for every 100 customer groups visiting the store, over 40% results in a purchase. That shows our business model with a strong omnichannel control, offers clear differentiation and resonates well with our target customers.

We will continue to analyze the Zhengzhou market carefully and prepare thoroughly to compete. With our mature business processes and digital systems, we are confident that Zhengzhou can also achieve strong results. Looking further ahead, the cities we're targeting for extension are all among the top 20 in China by vehicle ownerships, which provides very favorable market conditions. So we are confident that the success of Wuhan can be replicated in Zhengzhou and in our future new superstores.

That's my answer. Thank you.

At this time, we will conclude our question-and-answer session. I would like to turn the conference back over to Ellie Wang for closing remarks.

Thank you again for joining today's call and for your continued support in Uxin. We look forward to speaking to you again soon in the future.

Okay. Bye-bye.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]