What happened

Shares of Uxin (UXIN -4.49%) fell on Tuesday for the second straight session, dropping 20% as investors are still digesting a complicated second-quarter earnings report from the Chinese online used-car dealer. Essentially, Uxin lost a significant portion of its revenue after selling its loan facilitation business, resetting its business model a little more than a year after going public.

One person passes car keys to another.

Image source: Uxin.

So what

Uxin had announced in July that it was selling its loan facilitation business to Golden Pacer, a Chinese financial technology company, for $100 million, but the impact of the deal didn't become fully clear until Uxin reported second-quarter earnings.

In addition to the loan facilitation business, Uxin actually gave up its "2C" consumer-focused, intraregional sales operation, which comes at the same time the company is dialing down its "2B" dealer-focused, auction-based business. That means Uxin's revenue fell 36.4% to $63.9 million, a result that's concerning for a stock that's been premised on high growth.

Uxin presented the results adjusted for the divestitures and touted the strong growth in cross-regional sales, now the vast majority of the business following the deal with Golden Pacer, and the only part of its business that's growing. The company said that from a year ago, cross-regional sales jumped by 11 times to $46.9 million -- a reflection that that business was in its infancy a year ago -- and transactions rose 500%.

CEO Kun Dai explained the deal with Golden Pacer in a press release: "With our 2C [to-consumer] business model evolving into a pure play and through our innovative used car supply chain, we are better positioned to capture the market opportunities brought by the accelerating trend of buying used cars online."

Now what

With the change in strategy, Uxin is leaving behind the headaches of the financial and lending side of its business; the company said it would be "significantly relieved" of the guarantee obligation in its existing loan balance of $4.8 billion. Instead, the company is becoming a pure-play online marketplace, which may be a better way for it to establish a competitive advantage.

Nonetheless, after the setback in revenue, it's up to Uxin to prove that the transition is a wise move. Third-quarter guidance calls for revenue to be nearly flat sequentially and to fall about 50% from a year ago. That may help explain why the stock has lost nearly a third of its value over two days.