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spk00: Ladies and gentlemen, thank you for standing by. And welcome to Yuxin's first and second quarter fiscal year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce your host for today's conference call, Mr. Jack Wong. Please go ahead, Jack.
spk02: All right. Thank you, operator. And hello, everyone. Welcome to Yuxin's earnings conference call for the first and second quarters of fiscal year 2024, ended June 30, 2023, and September 30, 2023, respectively. On the call with me today, we have DK, our founder and CEO, as well as John Lin, our CFO. PK will review business operations and company highlights, followed by John, who will discuss our 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 that differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Now, I will turn the call over to our CEO, DK. Please go ahead, sir.
spk04: Thank you, host. Hello, everyone. I am very happy to meet you all again through the phone call. Thank you for attending our phone call. In order to communicate with investors around the country, I will share with you the latest progress of the company in a formal way.
spk02: Hello, everyone. Thank you for joining our earnings call. I'm pleased to reconnect with you all today on the call and to facilitate communication with both domestic and international investors. I will share our company's latest progress in both Chinese and English.
spk04: Due to the government's financing deal with the government in the first few months, the company delayed the release of the results for a quarter. Due to the financing transactions with the government of Hefei City in the past month, we postponed the release of our first quarter financial results.
spk02: Today, we're presenting the performance of the first and second quarters of fiscal year 2024, covering April to September 2023. I will first review the key highlights of the past two quarters, then share some of our achievements and future goals.
spk04: In the first quarter of 2024, that is, from April to June of 2023, with the peak of purchase after the end of the epidemic, the new car discount trend that began in March has continued to affect the Chinese car market. Consumers' emotions of buying second-hand cars have been raised. Under such a market situation, we have taken a cautious strategy. Storage control is at a low level. In the first quarter, sales of 1,687 units in retail decreased by 25%. In the second quarter of this year, which is from July to September, we began to increase the storage level. Sales of retail in the quarter rose to 2,287 units, with a 36% increase in return and a 5% increase in transaction volume at the same time as the industry.
spk02: In the first quarter of fiscal year 2024, from April to June 2023, we witnessed the end of a car buying surge initially fueled by pent-up demand during the pandemic. Subsequently, the aggressive pricing strategies of new cars beginning in March continued to reverberate through China's used car market. This shift led to a cautious approach by consumers who adopted an wheat and sea stance on purchasing used cars. Along with these market dynamics, we opted for a prudent card acquisition strategy, maintaining lower inventory levels. Consequently, our retail transaction volume in the first quarter saw a 25% decrease from the previous quarter, totaling 1,687 units However, in the second quarter between July and September, we strategically increased our inventory levels, resulting in a significant rebound in retail transaction volume to 2,287 units, a notable 36% sequential growth, and far surpassing the industry's average growth rate of 5% in transaction volume.
spk04: During this process, our resale volume has been stable for 45 days. The profit level is constantly increasing. The profit margin has increased from 1.3% in the same period last year to 6.2%. In September, CN's EBITDA has turned positive. The EBITDA loss after the company's overall adjustment is nearly 50% less than last year. At the same time, we have maintained an industry-high level of NPS for about 60 minutes in seven consecutive seasons. Our large-scale market model has been successfully verified. Business operations are already on the track of positive development.
spk02: Throughout this period, we effectively maintained the turnover days of our vehicles on sale below 45, while simultaneously enhancing our profitability as our gross margin has expanded to 6.2% from 1.3% in the same period last year. A notable achievement in September was our Xi'an Superstore reaching positive EBITDA, contributing to a nearly 50% year-over-year reduction in the company's overall adjusted EBITDA loss. Additionally, we consistently upheld the industry's highest Net Promoter Score, or NPS, maintaining a score around 60 points for seven consecutive quarters. This performance underlines the success of our Superstore model and signifies that our business operations are progressing along a robust and healthy growth path.
spk04: It is worth mentioning that the Hefei Changfeng second-hand car supermarket In September 2023, the total construction area of Hefei Changfeng Mall will reach 450,000 square meters, including a world's most advanced second-hand car remodeling factory and a world's largest second-hand car warehouse. At most, it can accommodate 10,000 cars. As the storage size improves, it will continue to drive company business in the next few years.
spk02: It is also worth highlighting that our state-of-the-art Changfeng Superstore in Hefei City commenced its trial operations in September 2023. Encompassing a vast area of 450,000 square meters, Changfeng Superstore features the world's most advanced used car reconditioning factory and the largest warehouse-style used car retail superstore. with a capacity to showcase up to 10,000 vehicles. The expansion of our inventory at this facility is set to significantly bolster the company's business growth in the forthcoming years.
spk04: At the same time, at the end of September, we officially signed the equity investment agreement with the Hefei local government. Hefei Jiantou Beicheng Industrial Investment will invest up to 1.5 billion RMB in Hefei subsidiaries in the next 10 years. At the same time, we signed an equity investment agreement with the local government of Hefei City at the end of September.
spk02: Under this agreement, Hefei Construction Investment North City Industrial Investment will commit up to 1.5 billion RMB over the next 10 years to Yuxin's Hefei subsidiary to support the operation and development of our used car superstore in the city of Hefei. The city's advantage is strategic location, favorable business environment, well-established automotive industry, and robust upstream and downstream supply chains offers substantial support in fostering E-SIM's continued business growth.
spk04: CN Supermarket completed its half-day upgrade in December 2022 and achieved EBITDA transfer in September 2023 after 10 months of operation. Hefei Supermarket has started its business in September 2023. Our goal is to achieve EBITDA transfer in Hefei before March 2024. Based on the scale of the market and the continuous control and optimization of cost and cost costs, we also have a clear roadmap for the company's overall profit. The goal is to achieve the company's overall EBITDA profit by September or before 2024.
spk02: Reflecting on our experience, since the relocation and upgrade of our CN Superstore in December 2022, it has successfully reached EBITDA profitability by September 2023, just 10 months into its operation. Our Hefei Superstore, which began its trial operations in September 2023, is on a similar path with an objective to reach adjusted EBITDA profitability by March 2024 or even earlier. Leveraging the scalable profitability of our superstores combined with our ongoing efforts in cost control and optimization, we have established a clear strategy towards the company's overall profitability And our goal is to reach overall EBITDA profitability by September 2024 or sooner.
spk04: Over the last two years, we have significantly enhanced our management capabilities and operational efficiency.
spk02: surpassing industry norms and edging us closer to our profitability targets. During the call today, I would like to highlight four key areas of development.
spk04: First of all, we have completed the training of the AI built-in vehicle pricing system. Our system has been able to carry out autonomous intelligent pricing based on various vehicle quantities, vehicle frames, vehicle colors, procedures, and other parameters, as well as combine customer attention, offline market feedback, market market, and other dynamic repair prices. Accurate pricing allows us to have enough market competitiveness for both the car and the vehicle, and ensures that the cycle efficiency of the car is stable at a healthy state of 30 to 45 days.
spk02: Firstly, we have successfully completed the training of our AI-powered vehicle pricing system. This advanced system also autonomously and intelligently sets prices for vehicles considering factors such as condition, age, color, and mileage. It also dynamically adjusts the quotes in response to customer interest, feedback from offline test drives, and market conditions. This position in pricing strengthens our competitive position in both purchasing and selling, ensuring an optimal vehicle turnover efficiency of 30 to 45 days.
spk04: Based on the high efficiency operation of the industry's leading second-hand car remodeling factory, we can provide a large-scale second-hand car supply base to increase the speed of car flow and reduce the cost of preparation. The introduction of advanced remodeling technology and equipment has ensured the output of car quality. Through the creation of the most advanced transparent factory management system in the industry, we have achieved a simplified repair, integrated data transmission, real-time monitoring of human and car materials, the best of all facilities, the intelligent allocation of task in the car, and the process of processing.
spk02: Secondly, by leveraging the efficient operation of our cutting-edge used car reconditioning factory, we have been able to accelerate vehicle turnover and slash reconditioning costs, all while maintaining the supply of used cars at a super large scale. The integration of sophisticated reconditioning technologies and equipment guarantees superior vehicle quality. We've pioneered the industry's most advanced transparent factory management system, facilitating integrated data transmission for inspection, diagnosis, and repair, while enabling real-time monitoring of our workforce, vehicles, and materials. This system optimizes the production process across Ford, implements intelligent parallel processing of workshop tasks, and has dramatically reduced the time frame from vehicle intake to sales listing to only three to four days.
spk04: Thirdly, in all business segments, we are also pursuing the ultimate cost-benefit ratio. Due to the reduction in the cost of supply chain integration and large batch preparation, in addition to the progress of the process, the use of innovative technologies such as 3D printing, smart repair, etc. also allows us to find new breakthroughs in cost control.
spk02: we remain committed to establishing an optimal cost and expense structure across various facets of our business. This is highlighted by the substantial cost reductions achieved through supply chain integration and large-scale vehicle reconditioning. Furthermore, we've leveraged advancements in operational processes incorporating innovative technologies like 3D printing and smart repair, which have led to groundbreaking improvements in cost control strategies.
spk04: Finally, the natural advantage of the local wholesale market on goods has also been verified. We provide a wide range of car choices through supermarkets. Good customer service and comprehensive customer protection. Good customer reputation spreads rapidly in the regional market. Xi'an and Hefei, two retailers, have become the first in the local consumer second-hand car brand recognition within a year. We can clearly see that as the local retail operations continue to mature, the flow of natural electricity is greatly increased, and the cost of goods is significantly reduced.
spk02: Lastly, we have proven the inherent advantages of our offline superstores in attracting customers. Through our superstores, we provide a vast array of vehicle options, exceptional customer service, and all-encompassing after-sales support, all of which had rapidly cultivated a robust reputation among customers in regional markets. Within just one year of operations, our Xi'an and Hefei superstores has ascended to become the leading brand in local used car market recognition. We have distinctly noticed that as our offline super stores evolve, there is a marked increase in organic food traffic, which significantly lowers the cost associated with acquiring new customers.
spk04: Our basic business model has been completely transformed. Our business model is now fully refined, and with confidence we anticipate that the company will reach overall profitability
spk02: filed before September 2024. In our long-term strategic vision, we see the superstore model as swiftly adaptable across various regions in China. Our expansion strategy into new cities will integrate even more innovative approaches, ensuring enhanced cost effectiveness and accelerated profitability for each superstore.
spk04: Next, our CFO John will show you the financial situation. John, please.
spk02: With that, I'd like to turn the call over to our CFO to walk you through the financial results. John, please.
spk05: Okay. Thank you, DK. Hello, everyone. Next, I will share with you the financial situation of the company in the first and second quarter of 2020.
spk02: Thank you, DK, and hello, everyone. I will provide a closer look at our financial results from the first and the second quarters of fiscal year 2024.
spk05: Just now, DK has shared the sales of the first two seasons. In the first season of 2020, we chose a more cautious collection strategy and maintained a relatively low inventory level. Our sales were 1,687 units, down by 25%. From the second season, we started to increase the inventory level. In the second season of 2020, our sales were 2,287 units, up by 36%.
spk02: DK has already provided an overview of our retail transaction volumes for this period. In the face of the fluctuating market conditions for the first quarter of fiscal year 2024, we adopted a prudent vehicle acquisition strategy and opted to maintain relatively low inventory levels. As such, our retail transaction volumes in the first quarter decreased by 25% sequentially to 1,687 units, During the second quarter, we increased our inventory levels, enabling us to grow our retail transaction volume by 36% to 2,287 units in the second quarter. Our second quarter's total sales revenue is 2.49 billion RMB, compared to the first quarter's 1.87 billion RMB, which has increased by 33%.
spk05: The continuous optimization of the storage structure is in line with the market needs under the current economic situation. The average sale price of our vehicles
spk02: Our retail sales revenue in the second quarter reached 249 million RMB, representing a sequential increase of 33% from 187 million RMB in the first quarter. In response to the evolving economic landscape, we diligently refined our inventory structure to align with current market demands. This strategic adjustment is reflected in the average selling price, or ASP, of our retail vehicles, which decreased from 120,000 RMB in the same period last year to approximately 110,000 RMB over the last two quarters. The wholesale business is basically stable. The wholesale sales of the first quarter are 1,567 units.
spk05: The wholesale income is 0.95 billion RMB. Our wholesale business segment remained relatively stable with a transaction volume of 1,567 units and a sales revenue of 95 million RMB in the first quarter, compared to 1,597 units with a sales revenue of 99 million RMB in the second quarter. In the second quarter, our total revenue is 3.56 billion RMB. In the first quarter, it increased by 2.89 billion RMB, with a 23% increase. As the cycle of inventory increases, the steady increase in service penetration rate increases, and the single-carburetor cost decrease caused by the large-scale production of modernized factories, our profit margin significantly improves. The profit margin in the first quarter and the second quarter of the fiscal year of 2024 is 6.1% and 6.2%. In the same year, it increased by 5% and 4.9% respectively. In addition, the revenue contribution of financial, insurance, financial products, maintenance, and maintenance, and other additional services is gradually increasing. The sales have increased in scale, and the number of mountaineering vehicles has been further reduced. In the future, we have a lot of room for improvement.
spk02: Overall, our total revenues for the second quarter were 356 million RMB, a sequential increase of 23% from 289 million RMB in the first quarter. Furthermore, we further accelerated our inventory turnover, increased the penetration rate of our value-added services, and reduced per-vehicle costs thanks to the efficiencies gained from our modernized factory operations. As a result, we saw a substantial improvement in our gross margin. Specifically, in the first quarter and second quarters of fiscal year 2024, our gross margins were 6.1% and 6.2% respectively. This represents a year-over-year increase of 5 and 4.9 percentage points. Looking ahead, we anticipate further enhancements in our gross margins fueled by an increase in revenues from our financial, insurance, and premium maintenance and repair services, coupled with cost reductions achieved through higher sales volumes.
spk05: The operating cost of the second quarter of this year is 91.6 million yuan. On the front of operating expenses, the second quarter showed a slight uptick.
spk02: to 91.6 million RMB compared to 87.8 million RMB in the previous quarter. This increase was largely due to the cost associated with opening our Hefei Changfeng Superstore, including expenses related to site relocation. Despite this, we have maintained stringent control over our operating expenses, ensuring they remain stable. This disciplined approach to managing expenses is key to our strategy for achieving our projected profitability in the future.
spk05: Loss from operations narrowed by 35% year-over-year to 63.2 million RMB in the first quarter and 38% year-over-year to 66.4 million RMB in the second quarter. Because the government platform has invested in Youxin Hefei's subsidiary, in addition to handling the financing and lease of Hefei Supermarket's site, Hefei Changfeng Supermarket has generated a large amount of non-cash and financial costs. In order to more reasonably and more clearly show the actual business situation of the company, from this year on, we have specifically disclosed the adjusted EBITDA and as the core indicator to measure the results of business operations. The adjusted EBITDA indicator
spk02: On the basis of standard and standard, we can show our company's profit and loss as a result of the government's investment in Yuxin's Hefei subsidiary and the financial leasing of the Hefei Superstore property. Our Changfeng Superstore in Hefei City has recorded substantial non-cash charges, including depreciation, amortization, and financial expenses. To provide a clearer picture of our actual business performance, we have started disclosing adjusted EBITDA from this year and are using it as a key metric to evaluate our operations. Adjusted EBITDA, which removes the effects of stock-based compensation and other one-time or non-cash items from the standard EBITDA, offers a more accurate reflection of our company's profitability.
spk05: With a significant increase in interest rates and a continuous improvement in cost-benefit structure, our profit and loss ability has also improved significantly. Xi'an Mai Chang has already achieved a beta transfer after adjustment in September of this year. In the first quarter of this year, the total cost of the company after adjustment was 46.6 million yuan, which decreased by 29.6 million yuan compared to the same period of 76.3 million yuan after adjustment, which decreased by 29.6 million yuan. The loss rate has increased by 39%. The improvement in our gross margin and a continuous refinement of our cost and expense structure has led to a substantial enhancement in our profitability.
spk02: Attachment to this progress is our Xi'an Superstore, which achieved positive adjusted EBITDA in September this year. In the first quarter, our corporate adjusted EBITDA was a loss of 46.6 million RMB, representing a reduction of 29.6 million RMB, or 39%, from a loss of 36.3 million RMB in the same period last year. Adjusted EBITDA in the second quarter with a loss of 45.9 million RMB, representing a reduction of 41 million RMB or 47% from 86.9 million RMB in the same period last year.
spk05: I would like to repeat the profit and loss target that DK just mentioned. We plan to achieve EBITDA profit at the market level by March 2020, and EBITDA profit after the company's overall adjustment by September 2020.
spk02: I would like to reiterate the profit target DK just mentioned. Our aim is to reach adjusted EBITDA profitability at the store level by March 2024, and extend this to the entire company by September 2024.
spk05: We have full confidence in the long-term high-quality development of our company, and will provide sufficient funding support for the growth and profit goals of our business. In September, we signed the equity investment agreement from the Hefei local government platform, We are confident in our trajectory towards high quality
spk02: sustainable development and our strong financial position is a cornerstone for future business growth and profitability objectives. In September, we entered into an equity investment agreement with the Hefei local government investment platform. Under this agreement, they have committed to investing up to 1.5 billion RMB in Yuxin's Hefei subsidiary over the next decade. with the first tranche of roughly 150 million RMB essentially completed. Additionally, we have arranged with our investors to finalize the remaining disbursement of nearly 30 million US dollars from previous funding rounds before the end of the year. Moreover, we recently secured new inventory financing from two financial institutions, amounting to a total credit line of close to 300 million RMB.
spk05: In terms of the performance of the third quarter of 2024, that is, from October 10 to December 2023, with the growth and storage of cars in the market, we expect the overall sales situation to return to a track that continues to grow. The sales of retail is expected to be 3,100 units. The retail single-car army price is 10.50 million RMB. The wholesale sales are expected to be 1,400 units. The wholesale single-car army price is 67,000 RMB. For the third quarter of fiscal year 2024, between October and December 2023, we anticipate a return to steady growth in sales as market conditions improve and inventory levels increase. Our retail transaction volume is expected to be around 3,100 units,
spk02: while the ASP for retail vehicles is expected to be around 105,000 RMB. We also expect our wholesale transaction volume to be around 1,400 units, with ASP expected to be around 67,000 RMB. We estimate that our total revenues, including retail vehicle sales revenue, wholesale vehicle sales revenue, and value-added services revenue, to be in the range of 410 million RMB to 430 million RMB. And that concludes our prepared remarks today. Operator, we are now ready for questions.
spk00: Thank you. If you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you are on a speakerphone, please pick up the handset to ask your question. When asking a question in Chinese, please restate your question in English immediately afterwards for the convenience of everyone on the call. Today's first question comes from Kai Kang with CITIC Securities. Please go ahead.
spk03: Thank you very much. So I have another question, which is about changing the growth profit margin. So in the second quarter of 2023, which means from July to September, we have achieved a big progress on the rebound of our growth profit. And we maintain at this level as a third quarter of the industry. So we know there are a lot of factors that contribute to that rebound. So could you give us more detailed information about the weight of different factors, especially the contribution from CNS IRC operation?
spk05: Okay. Okay. I'll answer this question. In the second quarter, we saw a 1.3% increase from the same quarter last year to 6.2% in the last quarter. There is still a big increase. Hi, this is John, and I'll address that question.
spk02: Our gross profit margin has seen a notable improvement, rising from 1.3% in the same period last year to 6.2% this quarter. The growth in gross profit for a retail vehicle primarily stems from two aspects, vehicle sales and value-added services. In the last quarter, the year-over-year improvement in gross profit was approximately 70% driven by vehicle sales and 30% by value-added services.
spk05: The uptake in gross profit from vehicle sales can be attributed to the success of our large superstore model.
spk02: This success translates to more accurate sales pricing, increased sales efficiency, and faster inventory turnover. Additionally, as the market stabilizes, the price spread in our used car sales has significantly improved compared to the previous year.
spk05: Youxin relies on our supermarkets and our most advanced factories to provide full-scale service, including finance, insurance, insurance, products, maintenance, maintenance, etc., This is a natural advantage of the business model compared to traditional second-hand car manufacturers. We can get more cost-effective products that are more suitable for customers, and purchase experience in the traditional second-hand car market through the offline wholesale market. This model achieves sales transformation, and the penetration rate of our increased service has been increasing. In the future, we believe that there is still room for improvement.
spk02: At Yuxin, we leverage our superstores and factories to provide a comprehensive array of value-added services, including finance, insurance, extended warranties, accessories, maintenance, and repairs. This business model represents a natural advantage over traditional used car dealers. We can offer customers more suitable finance and insurance products, cost-effective accessories, and achieve sales conversions through an offline superstore experience that surpasses traditional used car marketplaces. We are consistently improving the penetration rate of our value-added services, and we believe that there is still significant potential for further growth.
spk05: Xi'an IRC is also the establishment of our entire factory. Indeed, it is a great help to reduce the cost of preparing. It has a significant impact on the contribution of labor. As DK mentioned, we have the world's most advanced second-hand car manufacturing plant. We have implemented a transparent factory-related system. We have reduced the maintenance and repair of the entire road. We have greatly improved the efficiency of car traffic flow and reduced the loss of time and cost. At the same time, we have continuously introduced the most advanced equipment and the most advanced technology, such as 3D printing, smart maintenance, etc., and combined with our overall accessories and supply system, we are now further reducing the preparation time and cost of single cars. And with our Xi'an IRC up and running, the reduction in reconditioning costs has indeed made a noticeable impact on gross margin improvement.
spk02: As DK mentioned earlier, our transparent factory system featuring the world's most advanced used car reconditioning factory facilitates integrated end-to-end process management for inspection, diagnosis, and repair. This has significantly improved the vehicle turnover efficiency and reduced the time cost. At the same time, we continue to allow advanced reconditioning equipment and processes, such as 3D printing and smart repairs, while integrating the spare parts supply system. As a result, the reconditioning time and cost per vehicle has further decreased. As of now, the reconditioning cost per vehicle is more than 50% lower than a year ago. The optimization of the reconditioning process alone contributed about 1.5 percentage points to the improvement in our gross profit margin. And that is my answer to your question.
spk03: Thank you, Mr. Lin. I have another question for you. Last quarter, in July and September, we saw a rapid recovery of the retail sales. Do you think the price is stable in the current market? In fact, the price of the commercial car market has been stabilized. In fact, the price of the commercial car market has been stabilized. In fact, the price of the commercial car market has been stabilized. So we saw a certain retail transaction volume quarter coming up last quarter of 2023 from July to September. So do we think currently in the fourth quarter or maybe in the next few months this stable trend can be continued and there may be not strong sharp impact from the new car market? And so in 2024, our retail transaction volume will bounce and can be continued in the next year. Thank you.
spk04: Hello, Kang Kai. I'm Dai Kun. Let me answer your question. First of all, let's talk about the problem of sales. Because I think what you're asking is the combination of sales and sales volume, which is ultimately the problem of sales volume. Hi, this is DK, and I will address the sales perspective of your question first.
spk02: So from July to September 2023, after new car prices stabilized, the used car market gradually returned to normal. Our sales volume began to recover in July, showing a 35% growth in the September quarter compared to the June quarter. In the same period, the domestic used car market only saw an average sequential transaction volume growth rate of 5%. So our performance significantly exceeded the market.
spk04: So from the retail single-car army, it was around 110,000 in July and June, and now it's stable overall. It was about 120,000 at the beginning of the year, and about 140,000 at the same time last year. So the army of retail vehicles has dropped a little bit. The main reason is that we have optimized the storage structure. The second is that the current economic situation is such that the entire new car and the large market market are down. After the adjustment of our Kusun structure, our Kusun vehicles are mainly vehicles that have been in service for three to eight years. In general, the impact of the new car market is not that big. Then in October, the new car has a wave of new prices, but our ASP basically remains at a relatively stable level.
spk02: Regarding the ASP of retail vehicles, both in the September and June quarters, our ASP remained stable at around 110,000 RMB. At the beginning of the year, it was approximately 120,000 RMB, and in the same period last year, it was around 140,000 RMB. The ASP of retail vehicles experienced a slight decline many days to our proactive optimization of the inventory structure to align with the current economic conditions and market demands. So after completing the adjustment of our vehicle structure, our inventory now mainly consists of used cars aged 3 to 8 years. Overall, the impact of the new car market on us has lessened. Starting in October, new cars underwent a new round of price reductions, but our ASP has remained relatively stable.
spk04: Okay, that's my answer. Thank you.
spk02: And that's my answer to your question.
spk03: Thank you, leaders. Very clear.
spk00: Thank you. And our next question today comes from Fei Day with PF Securities. Please go ahead.
spk01: Hello, everyone. Can you hear me?
spk04: Yes, we can hear you.
spk01: Given that the current economy conditions are quite challenging, from the company's perspective, is there any change in market trace and consumer behavior? How is the company addressing the impact of economy change? This is my first question. Thank you.
spk04: Okay, let me answer this question. I think the most important thing to achieve profit-loss balance is three points. First, continue to increase the sales stock level at reasonable prices. Second, maintain the current sales turnover efficiency. Third, continue to promote down payment efficiency.
spk02: Hi, this is PK, and I will answer that question. So for us, attaining profitability really centers around three key aspects. Firstly, it entails consistently evaluating inventory levels through reasonable pricing. Secondly, it necessitates maintaining the current efficiency of sales turnover. And thirdly, it involves an ongoing commitment to drive cost reduction and enhance efficiency.
spk04: The continuous drop in the price of new cars has caused the market to fluctuate, which is the main potential impact we have seen so far. Due to the decrease in the price of new cars this year, the price of second-hand cars has dropped, which has led to a decrease in the purchase price of second-hand cars. The advantage lies in our AI system digitalization and pricing, which determines the reasonable price of cars. Sales customers need some time to adjust the price expectations of sales cars,
spk02: So the most notable potential impact that we observe is the market volatility stemming from the continual reduction in new car prices. On the vehicle acquisition side, the increasingly competitive pricing strategies in the new car market this year had repercussions in the used car market, lowering the acquisition prices for used cars. Leveraging our AI-driven digital pricing system, we can determine the most reasonable acquisition prices. Customers selling their cars may require some time to adjust their price expectations, potentially influencing the pace of inventory increase.
spk04: At the sales end, as we saw from the new car price trend in March, customers may re-create the audience mood for buying second-hand cars.
spk02: And on the sales front, as evident from the market response during the new car price reduction wave in March, customers may adopt a wait-and-see approach to purchasing used cars. 但是我们基于零售竞争力模型来进行车辆选品。
spk04: However, we're confident in continuously expanding inventory and maintaining a healthy sales turnover within 45 days by leveraging our retail competitiveness model for vehicle selection.
spk02: dynamically adjusting inventory structure, utilizing AI systems for digital pricing with timely market feedback, and benefiting from the high sales conversion efficiency driven by our leading brand influence and reputation in regions that we operate.
spk04: In addition, we believe that the new car market will return to a new stable stage. The fact that the price will continue to drop is something that cannot be continued. Then the supply and demand of the car market will return to normal. We have sufficient confidence in achieving our profit goal.
spk02: And furthermore, we anticipate the new car market to return to a new stable level. The price reductions are definitely not sustainable. And we also expect the supply and demand in the used car market to normalize. We're confident in achieving our profitability goals. Okay, that's my answer. Thank you. And that will be the answer to your question.
spk01: Thank you. This concludes our question and answer session. I'd like to hand the call back to management for any closing remarks.
spk02: Thank you all again for joining today's call and for your continued support in Yuxin. We look forward to speaking with you again in the future.
spk00: Thank you. This 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.
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