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spk06: Ladies and gentlemen, thank you for standing by for Autohome's second quarter and interim 2024 earnings conference call. At this time, all participants are in the listen-only mode. A question and answer session will follow management's prepared remarks. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. A live and archived webcast of this earnings conference call will also be available on Auto Home's IR website. It is now my pleasure to introduce your host, Sterling Soong, Auto Home's IR Director. Mr. Soong, please go ahead.
spk04: Thank you. Thank you, operator. Hello, everyone. I'm Sterling Soong, and welcome to Auto Home's second quarter and interim 2024 earnings conference call. Earlier today, Auto Home distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me today on today's call are Chief Executive Officer, Ms. Tao Wu, and the Chief Financial Officer, Ms. Craig Yansen. Management will go through their prepared remarks, which will be followed by a Q&A session, where they will be available to answer all your questions. Before we continue, please know that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filing with the US Securities and Exchange Commission and Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements except as required and applicable laws. Please also know that Autohome's earnings thresholds and this conference call include discussions of certain non-GAAP and audited non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found now, earnings relief. I will now turn the call over to Autohome's CEO, Mr. Hu, for opening remarks. Please go ahead, Mr. Hu.
spk05: Thank you, Song Kai. Hello, everyone. I'm Wu Kao, CEO of Autohome. Thank you for attending our call today.
spk04: Thank you, sir. Hello everyone, this is Tao Wu, CEO of Auto Home. Thank you for joining our early conference call today.
spk05: In the second quarter, Auto Home's net revenues grew steadily.
spk04: User traffic increased noticeably, and our innovative business continued to make breakthroughs, driving the continuous optimization and upgrade of our entire business structure.
spk05: In particular, the total revenue of Ergidu achieved RMB 18.7 billion, which increased by 2.2%. Among them, online marketing and other business income continued to maintain a double-digit net profit. to 33.1%, including data products, new energy vehicles, and many other business areas, showing a strong growth trend. In terms of revenue, Zengfu has exceeded 15% and nearly tripled. In terms of profits, we have maintained a healthy business development and continued to maintain a healthy profit-making ability while carrying out the promise of stable returns to shareholders. Second, Specifically, in the second quarter, total revenues grew by 2.2% year-over-year to reach RMB1.87 billion. Of which, revenues from the online marketplace and other businesses
spk04: continue to maintain double-digit growth year-over-year, reaching 33.1% of total revenue. Notably, many business lines such as data products and NEV have experienced robust growth, with revenues for the quarter increasing by over 15% and nearly doubling, respectively, year-over-year. In addition, we have maintained a healthy profitability while driving the development of our businesses and fulfilling our commitment to provide stable shareholder returns. In the second quarter, adjusted net income attributable to auto home was 572 million RMB, allowing our adjusted net profit margin to reach 30.6%.
spk05: Our new retail business map will be further expanded. With the decline in our sales volume, we have also increased the infiltration from high-end cities to low-end cities. Based on the existing vehicles and space stations, we quickly launched the satellite plan, using the space station as the core of the power supply, and deepening it into the wider low-end cities around us, forming a network layout with full coverage. This is not only accelerating the decline of our sales network, but also making our service boundaries significantly wider and reaching a wider market and user group. In terms of digitalization, we continue to promote the innovation and upgrade of products, and rely on smart products. We have launched a digital management platform, from basic facilities to digital tools to fine-tuning operation management. We have provided our business partners with a powerful digital support platform to help them achieve the performance of revenue management. In addition, our cooperation with Ping An Group has also entered a new stage. In the second quarter, we integrated the tools, content, and user service resources to create a comprehensive service system that runs through the entire life cycle of the car owner, providing users with a one-stop convenience service experience.
spk04: In our innovative business arenas, we have further expanded our new retail business reach, increasing and intensifying our penetration from high-tier to low-tier cities. By leveraging our established flagship auto home space doors as the core hub, we have rapidly initiated our satellite plan. This plan utilizes our auto home space doors as the core hub to extend our reach into neighboring low-tier cities, creating a network that radiates from a single point to cover an entire region. This network dynamic not only accelerates the reach and depth of the sales network, but also significantly broadens the scope of our services, enabling us to access a broader market and a wider range of users. On digitalization, we continue to drive product innovation and upgrades By leveraging the capabilities of our smart series product, we've introduced a comprehensive digital business management platform for our dealership partners, encompassing everything from infrastructure setup and development, digital tools empowerment, and the implementation of sophisticated operations management, providing our dealership partners with an advanced and systematic digital support system, allowing them to achieve increased efficiency in their business operations. In addition, our cooperation with Ping An Group has also entered a new phase. During the second quarter, we integrated various resources, including car purchasing tools, content, and vehicle services to establish a comprehensive service system that spans the entire lifecycle of car owners, providing users with a convenient one-stop service experience.
spk05: Looking forward to the future, we will continue to find the needs of users and develop them with innovative drives, and continue to explore the new industry of online and offline integration, striving to provide users with a more high-quality, convenient, and efficient service experience. Looking forward,
spk04: We'll remain focused on our user-centric approach, harnessing innovation to drive development while continuously exploring new models of online to offline integration, and in the process, strive to provide users with even higher quality, even more convenient, and even more efficient service experience. Over this course, we will fully explore and leverage the extensive resources and technology of Ping An Group to seek even greater synergies and identify additional opportunities in the automotive ecosystem. We believe that with our solid business foundation and diversified range of businesses, Autohome is well positioned to achieve a new phase of high-quality development.
spk05: Next, I would like to ask Mr. CFO Zeng Yan to introduce the business and financial situation of Zhijia in the second quarter of 2024.
spk04: With that, I will now turn the call over to our CFO, Greg Zeng, for a closer look at our second quarter 2024 operating and financial results. Thank you, Mr. Wu. Hello, everyone. I am Zeng Yan, the Chief Financial Officer of Zhijia. Thank you, everyone. Thank you, Amit. Hello, everyone. This is Craig Zeng, the Chief Financial Officer of Autoho. In the second quarter, we continued to deepen our focus on enhancing our content portfolio, revitalizing the content through two categories, professional content and broader general auto-related content, establishing AutoHome's new IP matrix. For example, in terms of professional evaluation, we have added specific evaluation content for hybrid, new energy, and fuel-powered vehicles. In terms of vehicle-based content, we have added the content for design, culture, and off-road vehicles. The overall design includes new car manuals, top-ten reviews, We will also integrate live broadcasts, short videos, and other forms into the content to form a more comprehensive content to meet the needs of users in different consumer scenarios. At present, there are more than 8.6 billion times of total exposure to this eight-page column, which greatly strengthens the comprehensive influence of the home platform. For example, regarding professional evaluation, we have expanded our content to include targeted evaluations for hybrid vehicles, NEVs and ICE vehicles. On general auto-related content, we've expanded our design, automotive culture, off-road vehicles, and other content for unique scenarios. resulting in the creation of eight IP programs, including SoFast.test, Top 10 Horizontal Evaluation, and Road of Rise. We are also integrating live streaming and a short video format into our content to form a more comprehensive content matrix that caters to our users' diverse consumption preferences. To date, These eight IP programs have garnered a total exposure of 860 million views across the entire network, significantly enhancing the influence of our platform. In addition, we have also created content playlists that cover the pre- and post-publishing of new cars. From the pre-release of exclusive 3D car models to the in-depth interpretation of the mid-term, In the later stage, the customized assessment effectively extended the exposure time of new car sales, not only helping B-end customers to spread the value of the product efficiently, but also greatly improved the influence of the home in the C-end users. CREST Mobile data shows that in June, the number of Japanese users reached 67,910,000 on the mobile end of the car, which increased by 8.3% in the same period in 2023. In addition, by focusing on the new vehicle launch event prioritized by OEM, they've developed a set of content offerings that spans the pre-launch, during launch, and post-launch stages of each new car launch. This approach begins with exclusive 3D car model speculations during the pre-launch, progressing to an in-depth introduction during launch and then customized evaluation post-launch, effectively prolonging the exposure time for each new car's setting point. This not only helps the end customers efficiently promote their products, but also allows Auto Home to gain influence among CN users. According to Quest Mobile, our number of average mobile DAU reached 67.91 million in June, an increase of 8.3% from a year earlier, and scoring our leading position in the auto media vertical. In the field of new energy, as Mr. Wu just mentioned, In mid-May, we launched the satellite plan, with the car's space station as the core, and built a satellite store in the surrounding first-line city, forming a core space station gate, and driving the 1 plus N service ecosystem of N satellites, extending the service point downwards, and digging for more regional market opportunities. Currently, we are in the first-line and super-first-line cities 28 cities across the country landed on the front of the space station, realizing the full coverage of the core city. At the same time, we also started in five cities to first test the satellite mode. Through the effective link between the space station and the satellite, a close sales service network was formed, realizing the new retail mode, from single-point breakthrough to full coverage mode upgrade. We believe that with the development of the satellite plan, to continue to advance, we will influence and serve more users in low-end cities. Turning to NEV, as Ms. Wu just mentioned, we initiated the Satellite Plan in mid-May, a strategic initiative to establish satellite doors in low-tier cities adjacent to the flagship Autohome space doors. This initiative establishes a one-plus-n synergistic service ecosystem where a single core Autohome space store could support multiple satellite stores, thereby broadening our service reach to more regional markets. To date, we have established Autohome space stores in 28 cities, including first-tier and super first-tier cities across China, achieving full coverage in these key urban areas. Additionally, we are piloting and testing the water for the satellite store model in five cities, Through effective collaboration between core Autohome space doors and these satellite doors, we've developed a comprehensive sales network, upgrading the new retail model from a single point to an upgraded comprehensive model. We are confident that the ongoing implementation of the satellite plans will enable us to influence and serve more users in low tier cities. We are actively responding to the state's policy to save Huanxin, using the space station of the home of the car and the whole west of Dapeng to be the subject. We have held the Baicheng Huanxin Shopping Festival to provide consumers with immersive car viewing, multi-brand comparison and market service, and will bring more mainstream new energy brands, flagship models and second-hand car replacement services to the local consumer market. The event lasted for two months and landed more than 100 offline car shows. Consumers participate in more than 500,000 people. We are also happy to see that the second quarter of the family continues to rise from the income scale of the new energy brand, and the revenue growth is nearly 100%, continuing to run the sales speed of the industry. In response to the national tradition for new policy, we leveraged our autumn space tour and holographic exhibition track as platforms to organize the 100 Cities for New Car Buying Festival, providing consumers with immersive car searches, multi-brand, comparative test drives, and other services. The event brings even more mainstream NEV brand models and used car exchange services to regional markets, spanning The festival featured over 100 offline auto shows and attracted more than 500,000 consumers. We are also pleased to see that revenues from NEB brands saw a continuous rise in the second quarter, nearly doubling compared to the same period last year, consistently uptating industry growth rate. In the digital field, we are following the trend of brand continuous operation. using model algorithms to improve user labels, help customers choose their target users more accurately, and determine the car's performance, and increase the power delivery rate significantly. Smart market price combines software hardware and AI inspection capabilities to solve the invisible pain points in the market price scene, and provide our customers with digitized management tools for the whole market price process. In the digital realm, we are embracing the trend of refined operations and have introduced smart digital connections for data products using model algorithms to improve user profiling. helping customers to more accurately identify target users, assess vehicle replacement intentions, leading to increased door visit rates. Smart Test Drive, another data product, integrates software, hardware, and AI human quality control capabilities to address the customer pain points of information opacity in test drive scenarios. This solution provides dealership clients with digital management tools covering the entire test drive process enhances the user test drive experience and helps dealers establish a closed-loop, data-driven ecosystem for their offline services. During the second quarter, Total Data Products achieved an increase in revenues year-over-year of over 15%. In the second quarter, our vehicle mining products continued to grow. After strict verification, the proportion of high-quality vehicles has steadily increased. In the first half of this year, the number of genuine cars on the Zhijia platform has increased by 50.4%, which has made it possible to improve the standardization of the entire industry. In this model, Zhijia's second-hand car business is combined with the space station as a point of offline service. At the same time, the car owner service center, which is responsible for security certification, provides after-sales protection. The second-hand car station service, which is jointly constructed, In the used car segment, our vehicle condition inspection tools have seen continued momentum with the proportion of strictly verified high-quality vehicles in our system consistently on the rise. In the first half of this year, there has been an increase of 55.4% year-over-year in the number of authenticated used car on our platform, effectively promoting the standardization for the entire used car industry. In terms of our business model, our used car business combines auto home space doors, for offline services with Ping'an's extensive network of car owner service centers to provide after-sales support. This one-stop used car service model has achieved strong results at our Chengdu pilot store. We plan to expand this model to additional cities in the second half of the year as the model continuously improves and matures. From the overall point of view, Innovative business continues to advance and bring income increase, reflecting the firm progress we have achieved in the field of car ecosystem strategy. In the future, we will continue to focus on the long-term upgrade of product technology to bring more rich content and professional services to users, and provide customers with more personalized and intelligent solutions. At the same time, we will actively seek to grasp the opportunities for growth in the new business field, to contribute to the company's development, and to create long-term stable positive returns for shareholders. Overall, Autohome's core businesses remain strong and stable, while our innovative businesses steadily make constant progress, contributing to generate incremental revenue streams. This reflects the substantial strides we have made in implementing our automotive ecosystem strategy. Looking ahead, we'll continue to focus on long-term development by enhancing our users' experience with more diverse and richer content, professional services, and more personalized and intelligent solutions. Furthermore, we'll seek out and seize opportunities for growth in new business areas, injecting new vitality into the company's development with the aim of creating stable, long-term positive returns for our shareholders. Next, I will explain to you the main financial situation in the second quarter of 2024. Please note that in today's discussion, I will only use RMB as a currency unit, unless there is another explanation. Next, let me briefly walk you through the key financials for the second quarter of 2024. Please note that, as with prior course, I will reference RMB only in my discussion today, unless otherwise stated. The total revenue of the second quarter is 18.7 billion yuan. In summary, the total revenue of the media service is 4.33 billion yuan. The revenue of the clue service is 8.2 billion yuan. The revenue of online marketing and other income is 6.19 billion yuan. The net revenues for the second quarter were $1.87 billion, breaking it down by segment. Media services revenues were $433 million. Least generation services revenues were $820 million. And online marketplace and others revenues were $619 million, up 14% year over year. In terms of cost, in the second quarter, The revenue in the second quarter was 346 million compared to 330 million in the second quarter of 2023. Growth margin in the second quarter was 81.5% compared to 82% during the same period last year. In terms of business expenses, the second quarter sales and market expenses were 7.53 billion yuan, the same period of the previous year was 8.24 billion yuan, the development expenses were 3.15 billion yuan, the same period of the previous year was 3.13 billion yuan, the general and management expenses were 1.18 billion yuan, the same period of the previous year was 0.91 billion yuan. Turning to operating expenses, sales and marketing expenses in the second quarter were $753 million compared to $824 million in the second quarter of 2023. Product and development expenses were $315 million compared to $313 million in the second quarter of 2023. General and administrative expenses were $118 million compared to $91 million during the same period last year. Overall, the second quarter of the car family's operating profit was $4.12 billion, and the same period of the previous year was $3.42 billion. The current adjusted net profit of the car family was $5.72 billion, and the same period of the previous year was $5.69 billion. Overall, we delivered an operating profit of $412 million in the second quarter this year compared to $342 million for the same period of 2023. Adjusted net income attributable to auto home was $572 million in the second quarter compared to $569 million in the corresponding period of 2023. Here are the results. Non-GAAP basic undiluted earnings per share in the second quarter were 1.18, up from 1.16 and 1.15, respectively, in the corresponding period of 2023. Non-GAAP basis and diluted earnings per ADA in the second quarter were 4.72 and 4.71, respectively, compared to 4.62 and 4.61, respectively, in the corresponding period of 2023. As of June 30, 2024, our balance sheet remains quite strong with cash, cash equivalents, and short-term investments of $23.47 billion. We generated net operating cash flow of 452 million in the second quarter of 2024. The above is our financial summary. With that, we are ready to open up the Q&A session. Operator, please open the line for Q&A session, please.
spk06: Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 1 2 on the hockey pad. You will then hear an automated message advising your hand is raised. To re-roll your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.
spk08: Thanks for your question, Thomas. My question is about some of the luxury brands like BBA that have recently launched their price tags. What do you think is the reason behind it? And I also saw that the government released a new policy on the market a few days ago. What impact will this have on the industry and our company? So I'll transfer myself. Thanks, management, for taking my question. And so recently we saw some luxury car brands exceeded the price wall. So what do you think the reason is behind? And also government launched some policies a couple of days ago. So how it will positively impact us and the whole industry? Thanks.
spk05: First of all, thank you for your question. In fact, since last year, our entire test competition pattern has gradually risen because the industry has also begun It should be said that the strength of the internal roll is also gradually increasing. In fact, in order to grab the market share, the price war is getting stronger and stronger. It should be said that the duration of the price war and the great strength of the price drop and the influence on the entire industry are beyond everyone's expectations. From the beginning of last year to now, the price war has been more than 500 days. Okay, thank you for raising this question.
spk00: Since last year, we see that the auto market competition becomes even more fierce with very severe rat racing, and all kinds of automakers start to reach the price wall in order to gain more shares from the market. You can see that the duration of this round of price war, the intensity of the price cut, as well as the depth to this impact goes beyond everybody's expectation. Since the beginning of last year to now, the price war has already lasted for more than 500 days. So for BBA, as well as the other luxury brands, they decided to withdraw from the price war after participating for more than one year. We think there might be the following reasons.
spk05: And this will also have a certain impact on the image of high-end brands. In addition, continuous price war is actually the most fatal thing to damage the profitability of the car.
spk00: So first of all, from the OEM perspective, we have observed that price for volume strategy doesn't slow down the decline of the sales. You can see there's one example. They originally priced 300,000 cars, now only sold at 200,000 RMB, with a price cut of 100,000. Even like that, in the first half of this year, Mercedes-Benz and BMW here in China still continue to decline versus December period last year. However, at the same time, the price cut also imposes negative impacts on the brand image of those luxury brands. Besides, we can see continuous price fall also harms the profitability of the automakers.
spk05: From another perspective, from the point of view of the financial market, because of the continuous price war, it only puts a huge pressure on the financial market. Let's look at it from two perspectives. First, it has a higher storage pressure. According to the statistics of the Chinese stock market in June, China's car dealership inventory is 62.3. This is of course above the stock line. In terms of brand types, luxury and imported brands' dealership inventory is 66.4. The mainstream box is 60.8. The main group is 61.5. From these three sets of data, you can see that the storage pressure of luxury brands is already far above the other two types of brands, so high storage is also faced by dealers.
spk00: and secondly from the dealers perspective those dealers are also under big operation pressure because of the continuous price war there are two aspects of this the first thing is a pretty high inventory pressure according to the statistics of chinese association of automobile manufacturers in june you can see that the chinese dealers inventory alert index was 62.3%, which is already above the threshold of PMI. And five brands, luxury and imported brands, their inventory early alert index was 66.4%. And for those mainstream joint venture brands, 60.8%. And the Chinese domestic brands, 61.5%. We can see that the luxury brands are under the biggest pressure, much higher than the other two categories.
spk05: The price gap has also led to large-scale losses for VBA dealers. In fact, in traditional times, in the entire VBA channel, luxury car dealers are relatively good. But now let's look at the first half of this year. In fact, more than 80% of car dealers have not completed the sales task. In fact, If we play again, the price will change, so it should be said that a considerable number of this gold and silver stores will be difficult to survive, and its profit and loss will appear. A huge threat in this case, in fact, the CEO of Huacheng BMW also said that BMW will maintain close discussions with friends from above and below, and explore how to continue the business model to ensure that all partners can make enough money to live in the future. In fact, this also means that For the gold market, the main market must maintain their profitability, otherwise their sales channels will not exist.
spk00: And the second side is actually BDS dealers already start to suffer from big losses. You can see according to the statistics, in the first half of this year, more than 80% of dealers cannot complete their sales goals and tasks. If they continue to go for the price for volume strategy, quite a few BBA dealers, they cannot survive anymore. In this circumstances, BMW Brilliant CEO said that BMW will continue to keep the close contact and discussion with upstream and downstream partners so as to explore the commercially viable model and to ensure all the partners can make enough money so as to live for the future.
spk05: Therefore, BBA decided to withdraw from the price station under the multiple pressures of decline in sales, profits, brand value, and business channels. After BBA withdrew from the price station, we saw that the movements of different car companies were not consistent. Some of them withdrew from the price station, but more car companies were actually watching. We think that the price station in the short term cannot be completely stopped. As a result, with the decline of the sales volume, with all kinds of pressures such as profitability, brand value, as well as dealership, BBA decided to withdraw from the price war.
spk00: So after BBA decided to withdraw from the price war, we see that different automakers, they don't act in a consistent manner. Some choose to follow, and the others choose to withdraw from the price wall. However, most of the automakers still adopt a wait-and-see attitude. We think that in the short term, the price wall cannot be totally ended, and with price cuts as well as poor sales performance, the price adjustment as well as withdrawal from the price wall may impose pressure on the sales volume of the automakers. As a result, we can see that market competition is still pretty fierce.
spk05: can make up 150,000 yuan. In contrast to the previous policy, the update of the car toll has doubled.
spk00: In terms of the policy update, since July the 26th, NDRC and the Ministry of Finance has printed out the document called several opinions intensifying the support on large-scale equipment replacements and consumer products trading for new, so as to encourage trade-in to promote the consumption of the automobiles. And also, at the same time, the designated car-garnet strategy subsidy standards have been really improved. And now, for the purchase of the MEV passenger vehicles, they can get a subsidy of 20,000 RMB, and the purchase of 2.0 liters and below, ICE cars can get a subsidy of 15,000 RMB. So, versus the previous policy, now car scrappage can get a doubling subsidy.
spk05: The Secretary-General of the Chinese Car Transport Association, Cui Zhongshu, said that the The expansion and replacement of updated subsidies is a major benefit to the car market. It is expected to effectively pull the waste of such a private car of about 2 million cars in the car market this year. It is also beneficial to pull more than 100 billion to update consumption. For home appliances, the demand for new energy car replacement is growing. It will be conducive to the development of our new energy business. With the increase in the number of Mr. Cui Dongshu, Secretary General of the DA also said that this round of car scrappage and replacement subsidy expansion and doubling is a very favorable news for the entire auto market.
spk00: It is expected to drive around 2 million car consumptions of this year. Sorry, 2 million cars scrapped this year and also in favor of driving more than hundreds of billions of replacement related consumption. And for auto homes, you can see that with the increase of the AEV replacement, it will be favorable for our AEV business. And with the opening of the offline franchising stores, we will better satisfy the customer's needs on car selection and car purchase. And for auto homes, we can see that the revenue coming from the AEV brands will also quickly arise in the near future.
spk05: In the short term, more than a year of industry roll-in has led to a serious decline in vehicle profits and caused a series of problems. We have also been plagued by industry typhoons. However, from a long-term perspective, as the price war gradually subsides, the government will continue to launch new good policies to support the consumption of cars. We also believe that the future of cars will still have a long-term growth space.
spk00: And in short term, you can see that more than one year of rat racing in this industry really compromised the profitability of the automakers and also triggered a series of issues. And we're also affected by this industrial headwind. However, in the long run, with the mitigation of the price war and with government keep launching favorable policies to support the auto market consumption, we strongly believe that the auto market is still equipped with long-term growth potential, and we are also bullish about the long-term sound development of the auto industry in China.
spk06: Thank you. Our next question comes from the line of Brian Gong from Citi. Please ask your question, Brian.
spk03: Thank you for accepting my question. I have two questions. The first one is a follow-up question. Because BBA has already withdrawn from the price range, I don't know how the second-hand car market is doing. Have you observed a trend in the transition of the border? The second question is that the traditional fuel car dealers are under a lot of pressure. Have we observed a decline in the supply chain? for taking my question. I have two questions. First question is regarding the used car markets, given recently easing price war by OEMs, what's the latest situation for used car markets? Have you observed any improvement, marginal improvement for used car markets? And the second question is about dealers. Have we seen a lot of closures of those dealers recently, or do you expect any large-scale closures in the future? Thank you.
spk04: Thank you. Let me answer this question. The car market has always been under pressure from the drop in the price of new cars. In June, the sales of second-hand cars dropped by one point. Now, many of the potential consumers of second-hand cars have gone to buy new cars because they are very cheap. However, the car owners who own them now may think that the price of second-hand cars is not very good, so they may not be very willing to buy them. By June, there was also a half-year surge in new cars, which led to a certain degree of decline in the price of new cars. Therefore, the sales risk of second-hand cars is also increasing. Therefore, in June, the number of second-hand car managers also dropped further to 41.2%, which is a 2.4% decline. This shows that the market for second-hand cars is still in a not-so-close range. There is a lot of competition.
spk00: Okay, thank you for raising this question. If you look at the used car market, because the new car price has been keeping declining as a result, it imposes a lot of pressure on the used car market. In June, you can see that the used car sales dropped by one percentage point year on year. Well, in this time, a lot of used car potential buyers tend to purchase the new car and the car holders because of their price volatility, they wouldn't like to sell their cars. So here you can see that we are already approaching the half year. So for the half year volume campaign resulted in a very big volatility of the new card transaction price. As a result, the sales rate for the used cards is already intensifying. And in June, you can see that used card UCMI index is also declining to 41.2%. a drop of 2.4 percentage points year-on-year, and also highlighting that the used car market is not performing pretty well with a lot of big competition as well as the pressure of the entire market.
spk04: From the data on the market, we see two characteristics. One is that the price is fluctuating at a low level. In June, the average price of the second-hand car was 64,000 yuan, which is a low point in the year. Seeing the price of the new car is not surprising. The other one is that the cross-regional traffic is active. The market is still very active. One of the characteristics of China is that the second-hand car sales have a very strong characteristic of crossing the zone. This also shows a need for trust. How to get a trusted car is also a very important market need.
spk00: So if you look at the market, we can observe the following two characteristics of the used car market. The first thing is that the price remains low. And in June, you can see that the used car average price remains at about 64,400 RMB, which is the low point within this year. And I think that this is within our expectation because of the new car price. And the second thing is that the cross-regional trading is very active. and the entire market is still have a lot of vigor and vitality. This is pretty unique in the Chinese market. As a result, to construct an integral and trustworthy and transparent industrial environment is very important.
spk04: Although the second-hand car market may have some challenges in the short term, from a long-term perspective, we think its scale, policy environment, market, and consumption needs are not as different as we expected. With the expansion of car consumption, consumers are increasing their recognition of second-hand cars. We are optimistic about the long-term development of the second-hand car market. As for Zhijia, in this difficult environment, we are still focusing on our own ability to cultivate, especially in improving our ability to trust in the car market. In the first half of this year, I mentioned that the number of new cars on Zhijia's platform has increased by more than 50%. Even though there are some challenges in short-term for the used car market, but in the long run,
spk00: We think that the scale, the policy environment, market structure, as well as the consumer demands of the used car market doesn't fundamentally change. And I think that with the car consumption market expansion, as well as the rising recognition of the consumers for the used car, In the longer future, we think that the used car market has still got a lot of potential and is expected to grow in a sound manner. And you can see from all home perspectives, we're also very much focusing on our own capacity building. For example, we intensify our products in terms of the car conditions and car status inquiry products. In the first half of this year, I already mentioned, our platform, the authenticated high-quality vehicles number increased by 50% year-on-year. We hope that with the entrance of auto home into this market, the consumers can actually purchase the used car in a reassured manner, and the used car market can become very active again.
spk04: The second question is about whether there are any potential returnees for traditional fuel trucks, or whether there will be large-scale returnees in the future. As you can see, the sales data of fuel trucks in the market, including the financial reports of those who have not come out in the first half of this year, and those who have been listed, are indeed very stressful. The potential returnees are inevitable. The second question is about whether there is a closure of the stores for the traditional ICE dealers.
spk00: And I think that if you look at the ICE field volume, as well as the announcement of the listed company, I think that the closure of the traditional ICE dealers is inevitable. If you look at the first half of this year, there are almost 5,000 stores are shut down.
spk04: But this is not entirely a one-off. Because from the overall car sales, we don't see too much decline this year. So this is a structural challenge. On the one hand, there is the appearance of different types of cars and new energy sources, and there is also the growth of different markets, especially in some low-end cities. Today, we see that whether it is from the main market or from the salespeople, they have to adjust to the changes in the market.
spk00: But this is not a one-way thing for adjustment. If you look at the overall auto sales volume, actually, there's no big decline. So this is actually the restructuring of this industry. We see the emergence of the NUV as well as the bigger penetration into the lower tier cities. So I think that in this circumstances, no matter for the OEMs or the dealers, they have to adapt and have to transform according to this trend.
spk04: So, from Zhijia's point of view, we are also helping customers to deal with this change. As we mentioned earlier, in our new sales business, we have a satellite plan. In our other business, we have also strengthened our cooperation with retailers in the offline market. We are also promoting the use of vehicles to help retailers to acquire more customers in the future. From our point of view, this is a market where opportunity and challenge coexist.
spk00: So from Autohome perspective, we also actively empower our clients to cope with this kind of challenges. As I mentioned before, in our new resale businesses, we also launched the satellite plan to enable our dealers as well as our OEM partners. And for dealers, we also actually help them in the car use services acquisition as well as expansion. So for Autohome, it's those opportunities as well as challenges.
spk04: Okay, operator, the next one, please.
spk06: Thank you. Our next question comes from the line of Richie Sun from HSBC. Please ask your question, Richie.
spk02: Mr. Wu, Craig, Sterling, good evening. Thank you for your time. I have two questions. First, I want to ask about competition. In addition to advertising, we have observed that some Internet platforms have also opened a lot of business related to car clues. Thank you, management, for taking my questions. I have two. First of all, in terms of competition, we have observed that a lot of internet platforms started to develop the least generation businesses as well as using large language model to improve the efficiency and conversions. So what does management will do or what will management do to address these challenges? Second or fourth, in terms of the cash balance, it is very adequate and profit is also quite stable. What does management feel on the potential special dividends or even lifting the dividend payout ratio? And would management consider launching a big-scale buyback program? Thank you.
spk04: This is not something new. This has been going on for a long time. They have been doing this for a long time. As for Zhijia, the challenges we face are always long-term. We are not able to find a clue. So for more people to come in, this has always been our market situation.
spk00: So for your first question, which is actually about the other entrance into the new generation businesses, actually this is not something new, and it already happened for quite a long time. And for Autohome, we think that this is a long-term challenge for us because we cannot monopolize this business.
spk04: So before we entered the automotive industry, we already had these search platforms and this kind of range of cars. We have been in the market for more than ten years, and we have been facing all kinds of competition. The way Zhijia uses it is our professionalism. We are a professional media company. We look at buying, using, and exchanging the whole life cycle to provide our customers with services and get clues.
spk00: So before Autohome entered into this area, actually there are already some search platforms as well as some pan-media engaging in this business. And after we entered into this area for more than 10 years, we still face quite serious competition. And for Autohome, we think that our specialty is about professionalism in the verticals. And we actually cover the whole life cycle, including car selection, car purchase, car use, as well as car replacements.
spk04: So our response measures are what we have been doing. They are mainly focused on three aspects. The first is that we have to keep innovating in terms of content. In recent years, Zhijia has also introduced short videos and live broadcasts to continuously enrich the content ecosystem. We also mentioned that we are going to create a new IP ecosystem, which will also have certain results. The second is to continuously improve the user experience. We continue to optimize our website, apps, and other interfaces to improve the convenience of our users. Third, we also widen our channels of cooperation. We are actively cooperating with other media to create a stream of evidence and achieve a consensus.
spk00: And in terms of the content measures to these challenges, we have three solutions. First is in terms of the content innovation. In recent years, Autofoam have introduced a lot of short form videos and live streaming, as well as the other new formats. So as to enrich our ecosystem of the content, Well, at the same time, we also build a lot of exclusive and unique IPs that have our IP ecosystem to differentiate from our competitors. And the second is in terms of the user experience enhancement, we keep optimizing our website as well as app interface design. so as to offer more convenience to our users. And third one is in terms of the corporation channel expansion. We have been cooperating with a lot of pan-media platforms so as to build the traffic matrix and so as to deliver win-win against the big competition.
spk04: Regarding the shareholder feedback, let me review it first. We have actually been improving our shareholder feedback. From 2019 to 2021, the company sent 20% of its annual profits to shareholders. In 2022, we updated the policy of stock market development. We distributed the shares at a fixed rate of no less than 500 million yuan, which increased to 28% in the past. In 2023, the company further revised the share policy in December and announced the decision to distribute the shares of 1 billion yuan. This increased the share price by more than 50%. At the same time, the company also plans to have a total of more than $1.5 billion in dividends in the next three years.
spk00: So the second question is about dividend payout. Let me first review our dividend payout history. Over the past two years, we have been keep enhancing the return to our shareholders. From 2019 to 2021, we actually distributed 20% of our net margin to the shareholders as a dividend. And in the year 2022, we also updated our dividend payout policy with a fixed amount of RMB500 million, which is equivalent to 28% of our net margin of the same year. And in December 2023, we keep amend our dividend payout policy and overnounce about RMB1 billion dividend payout decision, which is a hands of our dividend payout ratio to 50% of our net margin. So I think that in the next three years, from 2024 to 2026, the annual dividend payout amounts will be no less than 1.5 billion.
spk01: Please remain on the line. Your conference will resume shortly. Operator, the next question, please.
spk06: Thank you. Next question comes from the line of Xiao Dan Zhang from CICC. Please ask your question.
spk07: 感谢管理层接受我的提问。 那刚刚吴总和曾总在这个prepare remarks里面也介绍了我们新零售业务的卫星店的这个模式。 So thanks, management, for taking my questions. And my question is regarding your new retail model for NEVs. As Autohome launched the so-called satellite plan in the second quarter, so how should we think of your expansion plan going onwards? Thank you.
spk04: From September 2022, the first store opened. Now, the space station has opened 28 stores in 28 cities across the country. It has formed a sales network that covers the regions of Huadong, Hunan, Hunan, and Hubei. So far, the satellite mode has been in five cities. Yueyang, Yiyang, Lodi, Xiantan, and Zhuzhou. We are trying it out. In the future, we will try it out in many different ways. This is also a way to try it out. The current opening pace is basically the same as the one we had at the beginning of the year. Okay, thank you for raising this question. I think that
spk00: Launch of the first offline store in September 2022. Now we already, actually our space store already take roots in 28 cities in China and the covering south, east, and the southwest, as well as north part of China. And so far, you can see that our satellite storm model already covers five cities, including Yueyang, Yiyang, Lodi, Xiangtan, as well as Zhuzhou. And this is actually a new trial, and in the future, we're going to have a similar trial from the different angles. and the store opening pace is quite consistent with our communication at the beginning of the year because the St. Mark's store is a pretty new model, and the major purpose is to cover more low-tier cities so that our space stores can have a better reach out and coverage.
spk04: Okay, operator. That's the end of the Q&A session.
spk06: Thank you. I'll now turn the conference back to the management for closing comments.
spk05: Thank you, everyone. Thank you very much for joining us today. We appreciate your support to the company and look forward to updating you on our next quarter's earnings conference call in a few months time. And in the meantime,
spk04: Please feel free to contact us or email us if you have any further questions or other comments. Thank you very much. Bye-bye.
spk06: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
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