Operator

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 ].

Unknown Executive

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.

Dai Kun
Founder, Chairman & CEO

[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.

Feng Lin
Chief Financial Officer

[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

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

Bin Wang
Deutsche Bank AG, Research Division

[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]

Feng Lin
Chief Financial Officer

[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.

Operator

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

Wenjie Dai
SWS Research Co., Ltd.

[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.

Feng Lin
Chief Financial Officer

[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.

Operator

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

Unknown Analyst

[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?

Dai Kun
Founder, Chairman & CEO

[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.

Operator

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

Unknown Analyst

[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?

Dai Kun
Founder, Chairman & CEO

[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.

Operator

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

Unknown Executive

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.

Operator

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.]