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Uxin Limited (NASDAQ:UXIN)
Q2 2019 Earnings Call
Sep 23, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Uxin's Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Nancy Song, Investor Relations Director of Uxin. Thank you, please go ahead.

Nancy Song -- Investor Relations

Thank you, operator. Hello, everyone. Welcome to Uxin's second quarter 2019 Conference call. Today, DK, our Founder and CEO; and Zhen Zeng, our CFO, will discuss our financial results for the second quarter. Following the prepared remarks, DK and Zhen will be available to answer your questions.

Before we start, I like to remind you that our statements today will contain forward-looking statements that we make under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events that involve risks and uncertainties, which could cause actual results to differ materially from our expectations. Uxin does not undertake any obligations to update any forward-looking statement, except as required under applicable law. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC.

With that, I will now turn the call over to our CEO. DK, please.

Kun Dai -- Chairman of the Board & Chief Executive Officer

Thank you, Nancy. Hello, everyone. Thank you for joining our second quarter 2019 earnings conference call. As you may already know, we announced proposed transaction with Golden Pacer to divest our loan facilitation related business this July. As a result, going forward, we will completely divest our 2C intra-regional business, no longer provide a guarantee services for the 2C cross-regional business, divest the corresponding assets and liability, and therefore, significantly relieve ourself of guarantee obligation for the existing loan balance of the loan previously facilitated by us. Our 2C business now solely consisted of online used car transactions, which previously were recorded as 2C cross-regional transactions. The corresponding revenue streams are now commission revenue and value-added service revenue.

Before we dive into more details of the proposed transaction, let me first give a quick recap of our second quarter performance. It is important to note that the financial impact of the proposed transaction has already been reflected in our second quarter results, as required by the accounting policy. With relevant revenue costs and operating expenses of discontinued operations excluded from our financial results. We are pleased to report another strong quarter with 58% year-over-year increase in total revenue to RMB439 million. In particular, our 2C business continued strong growth path. In the second quarter, our 2C revenue substantially increased 11 times year-over-year to RMB322 million, contributing 73% of total revenues.

Looking at our 2C business in more detail, we continued to see robust momentum in our online used car transaction volume during the quarter. We completed over 24,500 unit transactions in our online shopping mall, up 500% year-over-year. This not only reflects the growing traction of our one-stop online used-car-buying products and services, but also demonstrated consumers increase, acceptance of buying used cars online from us without actually seeing the car when making the purchase decision. As we create the sales opportunity and control the entire shopping progress, coupled with our comprehensive product and service offerings, we have maintained our strong ability to monetize online used car transaction and record total 2C take rate of 11.2% per unit in the quarter equivalent to a per unit revenue of over RMB13,000. We have also made a notable progress on penetrating low tier city. Our nearly 800 franchisee contribute over 30% of total 2C transaction volume in the quarter, significantly up from a low teen percentage in first quarter.

More on to our 2C business because of our change of approach in serving consumers with car-selling needs as well as dealers' growing preference to sell used car on our 2C platform. As expected, our 2B transaction volume declined by 57% year-over-year to 39,500 units, but with take rate slightly increased to 3.7% in the quarter from 3.5% in a year-ago period. Given some 2B revenue decreased to RMB68 million, 2B business continues to serve as a complementary pillar of our business, as it strengthens our relationship with dealers by offering them high efficient auction channel to improve inventory turnover. We may also continue to provide a favorable terms to our dealer customers and to be profitable. So as to maintain customer stickiness and encourage them to expand a collaboration on our 2C platform at the same time.

With that, let me now share more color on the proposed transaction with Golden Pacer. As we divest our loan facilitation related business, we will only provide a financing product to referral service, going forward for those customers who want to finance their car purchased from our online shopping mall, and we no longer need to provide any guarantee services. Accordingly, we will be freed from putting down restricted cash as deposit at a bank escrow accounts. This will greatly lower our capital needs, improve cash flow and therefore create a more favorable operating environment for our long-term development.

In addition, the divestiture with allow us -- will allow us to fully focus on fulfilling online used car transactions, which is exactly our growth priority and strategy. We have always been a transaction center platform since day one. Now, with our evolved model of national online used car dealer, we are even better positioned to make the most of our strong suit in executing online transactions. More importantly, we firmly believe that to purchase a used car online is a clear and accelerating trend in China used car market. Mirroring exactly what has happened in the mature market overseas. Our strategy to focus all our resources on the online transaction area will enable us to better capture the massive market opportunities followed by this trend.

With our 2C business becoming a pure player, we will be better suited to utilize our innovative supply chain and infrastructure to provide consumer with full core value through our one-stop online used car product and the service offerings. First, a national wide selection of used cars. As updated to limited local selection, we are able to expand our inventory from local to national reach by operating a virtual national inventory system with over 18,000 offline dealers being our inventory suppliers. In the second quarter, we provide a real time selection of over 110,000 used car in our online shopping mall. More importantly, under our national online used car dealer model, we'd only take our actual inventory risk only when we receive a 100% of certain purchase order from the consumer who pay a 10% deposit for the purchase in advance, so we start to procure the inventory from the supplier.

Second, online standardization for unstandardized products. Our standardized video inspection reports and VR display for used car create a high transparency on car condition. In addition, our sales consultant will also visit a customer in person and help them [Indecipherable] video inspection reports, introduce car specifics, assist them in selecting the car they prefer and help them [Indecipherable] purchase. All of this will give consumer great peace of mind in buying a big ticket item online.

Third, a one stop online purchasing experiments. In addition to selling a used car, we also provide a financing and insurers product to referrals and a comprehensive warranty program as value-added service, plus comprehensive return policy to better meet consumers various needs and offer overall solutions.

Fourth, national fulfillment services. We have built up a national logistic network to make sure every used car will sell online -- we sell online can be delivered to the consumer on time. We also provide offline title transfer assistant to ensure a seamless and hassle-free ownership transfer between cities. Our [Indecipherable] data fulfillment services, make online shopping for a used car finally as convenience as buying any other standardized product online.

Looking ahead, we are excited about our growth potential in the year to come. We believe our new more focused business structure will boost our core value, and more importantly, enable us to leverage the market trend and a growth opportunity in online used car transaction in China. That said, the headwinds that China overall auto market has been facing since last year, we believe the used car market is more refinanced in a done -- in a down cycle because of used car, better price to performance. There is a great growth potential in the coming year. Given the size of the China market, it is off -- it is, of course, important to note that with early adoption of China 6 [Phonetic], the new emission standard, several regions experienced a drag in used car sales to some extent, and we have felt a certain effect as well. However, we believe the used car market will gradually take us to the effort -- effect and the macro environment will improve after short term adjustments.

[Indecipherable] to this environment, we have completed 38,000 online used car transaction on our platform in full year 2018 and aim to complete over 100,000 units this year. We are excited about the achievement to-date and the target that we set for 2019. It's demonstrated we have been winning our trust from a faster growing group of consumers who have accepted the revolutionary way of purchasing used car online from us without seeing the actual car when they make the purchase decision. This is particularly encouraging that our online used car transaction model has not only proved, proven, well accepted, but also have led us into a whole new chapter in China used car sector.

We are confident that as we continue to enhance our value proposition to consumers and consistently execute our growth strategy to expand online used car transaction business. We can maintain a strong momentum in the transaction volume for the increase of our market share and build a more sustainable business over the long term.

With that, I would like to turn the call over to our CFO, Zhen Zeng to talk through our financials. Zhen, please go ahead.

Zhen Zeng -- Chief Financial Officer

Okay. Thanks, DK. Hello, everyone. We are pleased to deliver another set of strong results for the second quarter. Before we go through the financial details, let me give you an overview on how the proposed transaction with Golden Pacer reshaped our financial profile. Please note that all the discussion and the comparison below are on an apple-to-apple basis.

Given the divestiture and in accordance with the applicable accounting standards, we significantly relieve ourselves off guarantee obligations for existing loan balance of RMB33.2 billion as of June 30, 2019 for the used car loans previously facilitated by us. In addition assets of RMB3.9 billion and the liabilities of RMB0.9 billion were reclassified as assets and liabilities held for sale on our consolidated balance sheet as of June 30, 2019.

And result of operations related to the divested business were reported as net loss or income from operations of discontinued operations. Revenue of discontinued operations and its corresponding cost of the revenue and operating expenses for the second quarter of 2019 were RMB464 million, RMB89 million and RMB378 million respectively. The proposed divestiture will effectively lower our capital needs flow and improve our cash flow, setting a solid foundation for our sustainable growth going forward.

And P&L-wise, our 2C revenue stream now include commission revenue and value-added service revenue. As DK mentioned earlier, our strong ability to monetize online used car transactions remains unchanged. We are confident that we can build up the scale in the top line for 2C online used car transaction on a more solid and sustainable basis, as we're fully focused on expanding this business pillar. The proposed transaction is expected to temporarily impact the gross margin due to our cost structure. Our cost out revenues mainly includes the salary of inspection professionals and the cost relative of offline logistics and the title transfer. This cost item are more associated with our continuous operation. So the majority remain within the [Indecipherable]. We are confident that the gross margin will further improve over time, as we continue to achieve better economy of scale, convert to more used car sales with us aiding too many used cars inspected, and further optimize logistical routes and better utilize our delivery capacity with the transaction volume growing larger.

Our ability on the front is evidenced by our gross margin improved to 53% in the quarter from 42% in the prior-year period. In terms of operating expenses, the proposed divestiture will save us a significant portion of the operating expenses, mainly due to the relevant employees will be transferred to the Golden Pacer accordingly. We have also streamlined the business operations to improve the employee productivity. As we continue to take prudent measures in cost and expenses management, we believe our fast growing online used-car transaction volume growth will bring us greater economy of scale and higher operating leverage. With all the measures in place and being executed, combined with our more focused business model and the streamlined operations, we are confident that we will be able to achieve profitability as soon as possible in the coming years.

Now, let me walk you through our financial details for the second quarter. Please note that all discussion below relates to continue operations only. All numbers are in RMB unless otherwise stated. Also please note that some numbers I refer to are non-GAAP. You can find a reconciliation of these numbers in our earnings release.

In the second quarter, total revenues increased by 58% to RMB439 million from RMB277 million in the prior year period. The increase was primarily due to the increases in 2C transaction volume, GMV, commission rates and value-added service take rate. Drilling down to our business [Indecipherable]. In terms of our 2C business, total 2C revenue were RMB322 million, representing a substantial increase of 11 times year-over-year from RMB28 million in the prior year period. Online used car transaction volume increased by 500% year-over-year to 24,585 units and its corresponding GMV increased by 482% year-over-year to RMB2,864 million.

Moving onto more details. Commission revenue was RMB179 million, representing a substantial increase of 893% from RMB18 million in the same period last year, primarily due to the increases in the transaction volume, GMV and commission rate, benefiting from our enhanced service, improve our user experience and higher pricing power, commission rate increased to 6.2% from 3.7% in the same period last year. Value-added service revenue was RMB144 million, representing a substantial increase of 14 times from RMB10 million in the same period last year, primarily due to the increase in the transaction volume, GMV and VAS take rate. The VAS take rate increased to 5% from 1.9% in the same period last year. Due to our optimized services which result in higher pricing power and higher percentage in our 2C online used car transaction that are successfully referred with VAS.

In terms of our 2B business, 2B transaction facilitation revenue was RMB68 million, representing a decrease of 57% year-over-year. Our take rate for 2B transaction facilitation slightly increased to 3.7% from 3.5% in the prior year period. Cost of revenues increased by 27% year-over-year to RMB205 million. The increase was primarily due to the increases in fulfillment cost, which was corresponding driven by the increase in our transaction volume, as well as the increase in salaries and benefits of employees engaging in car inspection, quality control, customer service and after-sales service.

Gross profit increased by 101% to RMB234 million from RMB116 million in prior year period. Gross margin increased to 53% in the quarter compared to 42% in the prior year period, driven by the better economy of scale. Total operating expenses was RMB577 million, non-GAAP operating expenses, excluding share-based compensation was RMB550 million. Sales and marketing expenses decreased by 14% year-over-year to RMB347 million, the decline reflects our continuous efforts to enhance operating efficiency. Sales and marketing expenses, excluding share-based compensation expenses of nil, as a percentage of the total revenue decreased to 79% during the quarter from 144% in the prior year period.

G&A expenses decreased by 81% to RMB174 million. The decreases was primarily attributable to the decrease in the share-based compensation expenses. G&A expenses excluding share-based compensation expenses was RMB147 million, representing 33% of total revenue in the quarter compared to 31% in the prior year period. R&D expenses increased by 28% to RMB56 million. The increases was primarily due to the increase in the salaries and benefits expenses. R&D expenses excluding share-based compensation expenses was RMB56 million, representing 13% of total revenue in the quarter compared to 10% in the prior year period. Loss from continuing operations was RMB342 million, a decrease from RMB1,258 million in the prior year period. Non-GAAP loss from continuing operations, which excluding share-based compensation expenses was RMB315 million, a decrease from RMB398 million in the prior year period.

Non-GAAP loss from continuing operations as a percentage of total revenue was 72%, a significant decrease from 143% in the prior year period. Fair value change of derivative liabilities was nil in the quarter compared to a gain of loss RMB1,544 million in the prior period. We no longer see any impact of derivative liabilities as the preferred shares were converted into ordinary share at the time of IPO.

Net loss from continuing operations was RMB360 million compared to a net income from continuing operations of RMB285 million in the prior year period. The change was mainly due to that of the fair value change of derivative liabilities no longer exist in this quarter compared again in the same period last year.

Non-GAAP net loss from continuing operations, which exclude the share-based compensation expenses was RMB333 million in the quarter, a decrease from RMB399 million in the prior year period. Non-GAAP net loss from continuing operations as a percentage of total revenue with 76%, decreasing significantly from 144% in the prior year period.

Turning to our cash position, as of June 30, 2019, we have cash and cash equivalents of RMB783 million.

Moving on to the guidance, factoring the divestiture of our loan facilitation related business to Golden Pacer, we expect the total revenue for the third quarter of 2019 to be in the range of RMB440 million to RMB460 million excluding the loan facilitation related business. This forecast reflects the company's current and preliminary view on the market and operational conditions, which are subject to change.

That concludes our prepared remarks.

Nancy Song -- Investor Relations

Thank you, Mr. Zhen. Operator, we'd like to open the call for questions now.

Questions and Answers:

Operator

[Operator Instructions] First question comes from the line of Eddy Wang from Morgan Stanley. Please go ahead.

Eddy Wang -- Morgan Stanley -- Analyst

Hey, DK and Zhen, and Nancy. [Foreign Speech]

I have two questions. The first is that, given our current strategy, is more concentrated on the online used car transaction business. May I have your view on your used car e-commerce industry? Does that mean that, for the industry wise, we have past the stage of market share as the first priority and leading used car path -- used car platform leverage on own advantages spend and more focused on their own strategies. And what's the implication in terms of the competition? Where the competition among these leading platform be not as intense as before. This is the first question. And second question is about the -- our strategic investors Uber [Phonetic], is there any incorporation or synergy we can share after they become our strategic investor in the second quarter. Thank you.

Kun Dai -- Chairman of the Board & Chief Executive Officer

Thank you, Eddy. [Foreign Speech]

Yeah. So look at the overall interest rate. So over the past years, auto industry players are trying different models. We don't want to take more time to look back about the history. But now, let me introduce how we look at the comparable metro market in the U.S.

[Foreign Speech]

Yeah. So we'll look at the U.S. market two -- mainly two players, CarMax and Carvana. So look at CarMax after their decades of operation, based on their current volume, their current market share is around 2%. If we look at Carvana, the U.S. online used car e-commerce platform based on their volume projection this year, their market share would be like 0.5%.

[Foreign Speech]

Yeah, so personally used car is a low frequency activity. So normally it would take like three to four years before a consumer to buy a second car. So if we look at the transaction frequency. If we look at -- for our 2B business, if we take more higher volume or the sale, it will be the right strategy, but it is not necessarily true for our 2C business because the costs for individual purchasers -- there will be more -- take more years before they come buying their second car. So in this case way, we care more -- or the consumers care more about the service. And for us, we care more about service and as well as the per unit margins and how we can drive down the per unit cost, so that's our focus.

[Foreign Speech]

Yeah, so for online used car transactions, we believe the selling is quite high. So because the traditional way of purchasing used car, the selection in a local city is quite limited. But for us, our real time inventory supply on our platform was about 110,000 used cars in Q2. So we believe we are the best choice for the consumer. So we believe chasing for the high quality of services and to maintain a high level of per unit revenue as well as achieve better margin profile for per unit will be our target and the focus.

[Foreign Language]

Yeah, so, UBA and us are two leading used car platforms for finest consumers. So in terms of the traffic population over the past few months, if investors look at UBA's applications, while our inventory has already been available on their platform, and also our customized and standardized video in fact reports are also available on UBA's application as well as their customer profile, customer information also there. So we also have the algorithms being optimized to free, assess what the consumer's preferences are as well.

[Foreign Speech]

Yeah. So our cooperating with UBA has been benefiting us quite a lot. We get more users from UBA. So over the past three months, if we look at the effective users, it's actually accounting for about 15% of our total effective users.

[Foreign Speech]

Yeah. Yes our high quality inventory have been available on UBA's platform, which will also benefit UBA's user and their customers to have a better purchasing security.

[Foreign Speech]

Yeah. Well, we move to the next level of our corporation, we will work more on the [Indecipherable] data sharing as well as the user data sharing. So based on the data analytics and who viewed our models well, we'll have our ability to recommend relevant events break through to the consumers. So as we mentioned, the previous two benefits that we can usually enjoy from each other, we believe we will further drive the synergies out of it. Thank you.

Eddy Wang -- Morgan Stanley -- Analyst

[Foreign Speech]

Operator

Thank you for the questions. Next question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead.

Ronald Keung -- Goldman Sachs -- Analyst

[Foreign Speech]

Thank you for taking my question. And I have two questions, DK, Zhen or Nancy. First is what I see we're now focused on inter-regional, so can you share what is the profile of your buyers maybe in the last quarter by city tiers, so we could understand how lower tier city are focused or what kind of focus we are on the user side and how do we see cross-regional volumes will track as a percentage of nationwide transactions and our market share in that segment.

Second is, could you walk through some of the unit economics? We hear unit revenue per car is now around RMB13,000. So want to hear what is the path to profitability based on our current model? On the revenue side and again the cost side and are there any sort of volumes that we need to reach in order to cover the fixed cost and to the path of profitability? Thank you.

Kun Dai -- Chairman of the Board & Chief Executive Officer

[Foreign Speech]

Yeah. So I like to address this question from two effects, so for the past 20 months, if we look at our online used car transaction in our inter-regional business, our clientele are normally the group of consumers with relatively high purchasing budgets. They're normally the mid to high end customers. This is also evidenced by our ASP of around RMB110,000 currently. So this group of consumers are caring more about rich selection of used cars. So normally they have their preference of certain car makes and models, interiors and colors etc..

[Foreign Speech]

Yeah. So this group -- this type of consumers normally have higher requirements for the used cars and services. So they care more about the car conditions, the aftersales services as well as the convenience of the service. So all of the focus they care about are more in line with our value proposition to the consumers actually.

[Foreign Speech]

Yeah. So no matter in top tier -- for top tier cities or lower tier cities, our product and service offerings are equally attractive to them. So even for Beijing the top tier city in China, our inventory selection also attracted to them. If we look at the price range of the car price of our current ASP RMB110,000, if we look at this car price range, our selection can be like 20 to 30 fold larger than the local selection in Beijing.

[Foreign Speech]

Yeah. We've started penetrating to lower tier cities since last December. So if we look at our own transaction volume, about 40% comes from the lower tier cities and 6% from top tier cities.

[Foreign Speech]

Yeah. Going forward, we will penetrate into more lower tier cities because our value proposition are more stronger in those city tiers.

[Foreign Speech]

Yeah, if we look at market share in certain cities, if we look at top tier cities, our market share there was close to 1%. If we look at low tier cities, our value proposition is stronger in those cities. Our market share will be almost close to 2%.

[Foreign Speech]

If we look at the transaction volume, whether it's in credit or inter-regional on our platform, actually, the consumers don't know where the inventory is located. So but if we look at the breakdown. 92% are the cross-regional transactions and only 8% happened locally.

[Foreign Speech]

Zhen Zeng -- Chief Financial Officer

Okay, thanks, DK [Phonetic]. It's Zhen. Sorry, I will address your second question on unit economics and the -- to profitability and for our top line, I think our current total 2C take rate was about 11.2% or to say in our per unit revenue of one car is over RMB13,000. So we are confident that we can continuously to increase our 2C take rate and we still have the room base to increase that because we are -- continue to enhance our value proposition to our consumer.

And for our costs, and I think there are mainly two item, one is the inspection and one is logistics, again, the title transfer. And the for the -- our inspection and that's mainly the salaried and benefits on inspection professionals, and our strategy is we don't expect to aid too many the professionals to inspect more used car in the future. Instead, we focused more on the conversion from the cars inspect to the car sold. So we also will print featured car for the inspection by the sustainable price range and no material damage car conditions. So we'll select the car which will be inspect. In order to save the inspection productivity only for those qualified cars.

With optimized inventory structure, we believe we can sell much more cars without inspecting equally that many. This will greatly drive down the per unit inspection cost. And for the logistic and the delivery, as we grow our transaction volume, we are able to further optimize the delivery route planning and better utilize our delivery capacity. This will also significantly lower our per unit delivery costs. In our ability to -- on this front is actually evidenced by our gross margin improved to 53% in the quarter from 42% in the prior year period.

And looking ahead, we are confident that we can further improve gross margin as we continue to grow our scale, increase the take rate and we optimize each the cost item. And for the [Indecipherable], we're now more focused on the conversion of our traffic. So we will continue to optimize the traffic acquisition channel to generate more cost effective sales leads and enhance the conversion rates. And with the traffic spending stabilized at a current level, we are confident to lower per unit traffic acquisition cost as well. And for your -- for the number, I think that with all the optimization measure in the place, we believe I -- we can reach a breakeven point when we carry out about 50,000 cars per quarter. Thanks, Ron.

Ronald Keung -- Goldman Sachs -- Analyst

Thank you, DK. Thank you, Zhen.

Operator

Thank you for the questions. Next question comes from the line of [Indecipherable] from Credit Suisse. Please go ahead.

Unidentified Participant

[Foreign Speech]

Thanks management for taking my question. Two questions from me representing Tina. The first one is about target volume growth for this year in 2C business. And what would be the key drivers. And the second question is about the cross-regional business. What do you see as the major challenges ahead and how to solve them? Thank you.

Kun Dai -- Chairman of the Board & Chief Executive Officer

[Foreign Speech]

Yeah. So with our first half, transaction volume was over 44,000 units. Well, looking at over 100,000 for the whole year.

[Foreign Speech]

Yes. So look at the -- look at longer term, as we just mentioned based on our value proposition, we believe we have further drive our transaction volume. So the first one is the wide selection of used cars, and now based on our AI Intelligence System, we have a better understanding of people's preference and know which type of inventory are more preferred by the consumers and that we enhance our inventory structure.

[Foreign Speech]

Yeah, rest three of the values are the online standardization was purchasing experience and our offline fulfillment network. So for the online standardization, we will enhance our ability to provide the most accurate conditions for -- car conditions for the consumers. And for the [Indecipherable] solution, we will enrich our value-added services and further fulfilments we will make it -- make the delivery more convenient to the consumer. So all of the three values will build up our brand and increase the word of mouth among the consumers.

[Foreign Speech]

Yeah so the third driver is our sales productivity. So because online used car transaction is a whole new model for the consumers as well as for our sales force. So how to convince consumers to buy the car without seeing the car in the first place is important. So the seniority of our sales stuff are important for us to drive us the volume. So if we look at our sales people, if they being with us for more than 12 months, their sales [Indecipherable] is much higher than the new guys in terms of -- if we the receive the same bunch of sales fleet. So our focus will be increasing the sales productivity and the rates from our sales force.

[Foreign Speech]

Yeah. So for your second question. The challenges this year we think comes more from the micro side. So the first way is the overall auto market is facing some headwinds, though the -- but the used car market is less effective than the new car market.

[Foreign Speech]

Yeah another factor is the early adoption of China VI new emission standard. So the early adoption did drag the used car sales in some cities or about 40 cities in China. Given the China VI standard, it's pretty newly introduced, they're actually like I mean -- there are no enough new car inventory supply in the used car market.

[Foreign Speech]

Yeah. For the -- of all the auto market we think the market condition will improve because we think the current car ownership in China is still low. So where the macro economy is taking of the auto market will pick up as well. Regarding the China VI new emission standard, the government policy actually rules out these 40 cities from the restrictions of about car cross-regional transactions. But besides that, we don't see more cities will adopt the new standard in the short term.

[Foreign Speech]

Yeah so, if we look at -- looking into next year, in the first half, we think there will be more used car with high. I mean, the new emission standard used car will be supplied to the market.

Operator

Thank you for the question. The last question comes from the line of [Indecipherable] from JPMorgan. Please go ahead.

Unidentified Participant

Hello, this is Rebecca [Indecipherable], I'm asking for Alex [Indecipherable]. So my first question is, what's the reason for the massive uptick of the second 2C transaction take rate from 6% to 11% in the second quarter? Could you provide us with some breakdown? And also, any guidance for the take rate in the second half of the year or longer term? And second question is on the business model transition with long term implication to business risk and scalability? Thank you.

Zhen Zeng -- Chief Financial Officer

So OK, I'll address your first question, [Indecipherable]. So in terms of the total 2C take rate, so as the result of the -- that feature of our 2C revenue stream now is converted to the commission revenue and value-added service revenue. Accordingly, we change the commission rate and value-added service take rate from the consumer. So thanks to the sales opportunity we create -- our controlling and the entire shopping process and our comprehensive products and service offering, our ability to monetize online used car transaction remains as strong as before. So this is evidenced by our total 2C take rate to 11.2% per unit in the quarter, up from 5.6% in the same period last year.

I think the other strong monetization ability is also well supported our -- by our unmatched value proposition to the consumer. So like DK mentioned, we have the four main value proposition, first, the nationwide selection of used car, which is much wider than the local market can provide. And the second the online standardization for the unstandardized products, such as the standardized video inspection report and we already play for the used car, and which creates higher transparency on the car condition and thus gave the consumer greater peace of mind from buying the used car online. And the third is one stop online purchasing experience, which means we -- which -- us value-added service to the vast -- to meet the consumer's various needs. And the last, but not least, other national service and consumer network, which make online purchase of used car as convenient as buying another standardized product online. So we believe our -- the four core value propositions enable us to maintain our total 2C take rate at a similar level and to -- that before we divest the long facilitation related business.

Kun Dai -- Chairman of the Board & Chief Executive Officer

[Foreign Speech]

Yeah. As we previously mentioned, online used car transactions will be -- accelerating globally because, it brings greater value to consumers that we just mentioned, the wide selection of used cars as well as better prices provided to the consumers. So they have higher saying or bargaining power during the process and that way the transparency of the car conditions. So with the online used car transaction products and the service offerings, consumers can finally enjoy standard services in the used car, when they purchase used car the same as they purchase a new car.

[Foreign Speech]

Yeah, so maybe it is the trend. I think the largest risk for us is all about execution that needs to say how we can further enhance user experience and because this is whole new experience for consumers to pick the car without seeing the car actually -- physically seeing the car. So how we can convince them to choose to do so is more important.

[Foreign Speech]

Yeah. So the cast the transparency on car's condition and how we can help consumers to better understand the car's condition as well as if we can deliver the car in time, whether, we can provide well rounded after services and the product, all of the three things are very important to enhance user experience. So I think our challenges are more on this front. That is why we will focus not only our capital -- with our resources on this business, but also for our all of the management and our employees will work together to work toward this initiative.

[Foreign Speech]

Thank you.

Operator

Thank you for the question. There are no more questions from the line. I would like to hand the call back to management for closing.

Nancy Song -- Investor Relations

Thank you, everyone, for attending our call today and for your continued support for Uxin. We look forward to speaking to you again in the near future. Thank you.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Nancy Song -- Investor Relations

Kun Dai -- Chairman of the Board & Chief Executive Officer

Zhen Zeng -- Chief Financial Officer

Eddy Wang -- Morgan Stanley -- Analyst

Ronald Keung -- Goldman Sachs -- Analyst

Unidentified Participant

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