Uxin Limited (“Uxin” or the “Company”) (Nasdaq: UXIN), the largest
used car e-commerce platform in China, today responded to the false
and misleading allegations made by a report (the “Report”)
published by J Capital Research on April 16, 2019.
The Company believes that the allegations in the
Report are unfounded, and the Report contains numerous errors of
fact, misleading speculations and malicious interpretations of
events, and reflects a general misunderstanding of Uxin’s business
model and China’s used car industry. To protect the interests of
its shareholders, the Company hereby provides its responses to the
allegations raised in the Report below.
False allegation 1: “Overstated
transaction volume”The Report alleges that Uxin has been
“exaggerating its transaction volume by as much as 40%”. The
Company responds to each of the Report’s key errors below.
- Coverage of business operationThe Report shows
a lack of basic knowledge of China’s administrative divisions. In
China, prefecture and county-level cities are administered by
province-level municipalities or provincial capitals. Additionally,
prefecture-level cities also have respective county-level cities
under their administration. Uxin’s business operation reflects such
administrative divisions. On Uxin’s mobile app, when clicking into
their first-level city, users will see a list of second-level
cities and regions that are linked to the first-level city through
these administrative hierarchies. (Please see Example 1 and Example
2.) Uxin currently has business operation in about 900 cities and
regions across China, including all levels of these administrative
divisions.
- Number of online listings
a.
Cross-regional used car listingsOne of Uxin’s key
competitive advantages lies in its ability to fulfill
cross-regional transactions. On Uxin’s platform, as long as a used
car meets transfer-in criteria and is allowed in the cities where
users are located, it will be displayed to all users in the
allowing cities and available for purchase in all of these cities.
Users in different cities across China will see different prices
for the same car because the distance between the geographic
location of the used car and the location of the potential buyer
varies from user to user. A car’s selling price listed on Uxin’s
platform includes both the title transfer and logistics fees, which
vary depending on the distance between where the car is located and
where the buyer is located.(Please see Example 3.) Although the
same car is shown to users in multiple cities and regions where it
is allowed to be transferred in, the car only counts as one vehicle
on Uxin’s platform. A car will be assigned two sets of vehicle
codes depending on whether it is tagged as a car with or without
financing packages, but this is only for the ease of internal order
track and the car still counts as one vehicle. Therefore the
allegation of repeated counting vehicles is entirely
groundless.
b.
SeasonalityChina’s used car industry experiences
clear seasonality, as players in the industry generally experience
low season in the first half of the year and high season in the
second half. Uxin’s listings also reflect this seasonality. In the
fourth quarter of 2018 (peak season), Uxin had a real-time listing
of approximately 200,000 used cars. The current (low season)
real-time listing is approximately 130,000 used cars.
c.
Listing removal and uploadUxin has a dedicated
team which monitors used cars in the used car market at least once
every two days. Once a used car has been sold, the dedicated team
will make sure that the listing is removed within 48 hours,
ensuring that Uxin’s used car listings are as accurate as possible.
For a new listing, Uxin is only able to conduct a thorough
inspection when the Company receives the car key from the dealer.
Uxin provides a standardized inspection service for dealers and
uploads the car listing for free. As Uxin creates additional sales
opportunities for dealers without requiring them to pay any upfront
fees, the Company believes dealers have no incentives to reject
such free service.
d.
Non-exclusivitySince its inception, Uxin has
always served as a transaction platform which enables dealers to
conduct used car business more efficiently in China. Uxin has never
functioned as an online dealer itself by taking inventory. As the
Company does not take used car inventory, the listings on Uxin’s
platform have never been exclusive and naturally can be found on
other platforms as well. Different from car-listing sites that only
provide basic information about used cars, Uxin operates as a
transaction-centric platform by inspecting used cars listed on its
platform, facilitating transactions and providing warranty
programs, as well as offering a full suite of transaction services
throughout the entire value chain, including logistics, title
transfer and offline fulfillment. Uxin not only helps address the
issue of trust between car buyers and dealers, but also gets deeply
involved and facilitates transactions for dealers.
- Revenue per carIn connection with the
intra-regional 2C business, Uxin facilitated a certain number of
used car transactions free of service charge. The transaction
facilitation take rate disclosed in the Company’s earnings release
is a blended average take rate, measured by the revenue of 2C used
car transaction facilitation business divided by the GMV of 2C
business.
- Sales consultant productivityIn 2018, Uxin’s
top sales consultants typically recorded monthly sales of 20~30
used cars, much higher than the 10 used cars falsely claimed in the
Report.
- Taking no used car inventory Uxin has
always served as a transaction platform which enables dealers to
conduct used car business more efficiently in China, and the
Company does not take used car inventory.The Uxin lot located in
Shijiazhuang mentioned in the Report is an offline fulfillment
center, where cars are waiting to be picked up by car buyers or to
be delivered out of the city. Uxin does not buy or own the cars,
which is why the cars parked there all hold temporary license
plates. The Shijiazhuang lot provided as evidence in the Report
actually proves Uxin’s capabilities of facilitating cross-regional
transactions.
False allegation 2: “Undisclosed
debt”The total outstanding principal balance of loans
facilitated by Uxin through its platform as of December 31, 2016
and 2017 and March 31, 2018 have been disclosed on page 17-18, F-19
and F-92 in the prospectus dated June 27, 2018 in connection with
its IPO (the “Uxin IPO Prospectus”). The Company will continue to
disclose material information in its future SEC filings in
accordance with applicable securities laws and SEC rules.
As to the reason why Uxin does not need to
record the outstanding principal balance of loans facilitated on
its balance sheet as liabilities under U.S. GAAP, please refer to
Uxin’s correspondence with SEC on March 23, 2018 (response to
Comment 35 on page 17).
False allegation 3: “Fake
values”Uxin helps consumers take out loans from banks
through its loan facilitation services. Consumers sometimes have
the needs to lower purchase barriers and want to finance not only
the car price, but also insurance, purchase tax and service fees.
Per the car buyer’s request, Uxin also works with banks to provide
such auto financing options. If the consumer chooses one or more
additional items to be financed on top of the car price, the total
loan amount will be higher than that if he only finances the car
price.
In connection with the loan facilitation
services, Uxin only charges service fees, which together with other
related fees and expenses, are specifically listed in the contract.
Down payment from consumers and loan amount approved and granted by
the bank are all paid to the third parties, such as the dealer and
insurance company. Uxin maintains very high transparency regarding
all the financing related fees and expenses, and currently has
three measures designed to ensure that car buyers know all relevant
details regarding their loans.
- The loan applicant must sign a detailed payment summary which
lists the loan amount and all related fees and expenses.
- When signing a loan agreement, the loan applicant must read out
the loan amount, tenor, down payment and monthly repayment. The
entire process is recorded and archived.
- Once the transaction has been completed, the car buyer can
check loan-related details on Uxin’s mobile app. (Please see
Example 4.)
In addition, Uxin leverages its AI-enabled
pricing engine to evaluate a car’s residual value and generate
pricing insights. The Company is very confident in the
effectiveness of its pricing system.
False allegation 4:
“Circular transactions”GMV is not the
Company’s revenue. The Company only recognizes transaction
facilitation service fees received as revenue in accordance with
U.S. GAAP.
Payment through POS machines is one of the ways
that buyers can make a payment. Uxin is working with third-party
payment companies that provide POS machines. All the hardware
equipment and software systems are developed by the third-party
companies under stringent regulations. Uxin cannot access the
equipment manufacturing or software programming. When a consumer
buys a car on Uxin’s platform and makes a payment via the POS
machine, the POS machine processes a T+0 settlement directly
between the car buyer and the dealer. The payment is made through
an account on the third-party platform, and Uxin does not hold the
payment for any period of time, allowing the dealer to receive the
payment instantaneously.
Uxin has never paid dealers to buy fake
transaction volume, and thus no such costs have ever been incurred.
Regarding cars without any financing package attached, sales
consultants are not allowed to “brush” transaction volume by
purchasing invoices/receipts and contracts. This is because the
Company inspects and certifies used cars sold through Uxin’s
platform, and only authentic transactions can be traced back to a
text plus picture inspection or video inspection report. For
financed cars, it is even less likely for sales consultants to
“flush” sales by buying invoices/receipts from dealers, because
auto financing related transactions are not recognized simply with
invoices/receipts. Instead, Uxin can only recognize an auto
financing transaction if and when the loan applicant has passed
both the bank’s and Uxin’s credit assessment systems, conducted a
recorded interview, which will be reviewed by headquarters,
obtained approval for the loan, and the money has been successfully
wired out from the bank. In addition, similar to non-financed
transactions, only authentic financed transactions can be traced
back to a text plus picture inspection or video inspection report.
Uxin charges a loan facilitation fee in a standardized manner. All
payment items are specifically listed in the contract in a
transparent manner to car buyers. Sales consultants have no
authority to change the fee rates, nor does Uxin believe they have
means to do so.
False allegation 5: “Overstated
inventory”In line with the Company’s response to False
allegation 1, Uxin only counts each used car once, although it may
be shown on Uxin’s platform in multiple cities and regions with
different prices. In addition, used car listings are affected by
seasonality. Uxin does not take used car inventory and thus no car
listings are exclusive. The allegation that Uxin is “overstating
inventory” thus reflects a complete misunderstanding of the
company’s business model.
Uxin has always served as a transaction platform
which enables dealers to conduct used car business more efficiently
in China, and does not take used car inventory.
False allegation 6: “Siphoning
Cash”
- Allegation of Mr. Kun Dai taking $100 million out of
Uxin before IPOAs previously disclosed in the Uxin IPO
Prospectus, Mr. Kun Dai and/or his controlled entities borrowed an
aggregate of US$107.7 million from Uxin, with principal and
interest totaling US$114 million (please refer to page 176 in the
Uxin IPO Prospectus). All of the aforementioned borrowings were
used for Mr. Dai’s payment of consideration to increase his
shareholding in Uxin between 2015 and 2017, and the costs and
interest incurred in connection with third-party loans that were
also taken out for these shareholding increases. The allegation
that Mr. Dai is “walking away with $100 mln in cash” at the cost of
US$7.2 million is completely untrue, and the cost of “$7.2 million”
is purely groundless and speculative.As previously disclosed in the
Uxin IPO Prospectus, before the IPO, and with the Board’s and
shareholders’ approval, Mr. Dai repaid all of the outstanding
principal and accrued interest on these loans, which totaled US$114
million, by surrendering to Uxin 37,990,840 shares for cancellation
at either the IPO price or the price in Uxin’s last round of
financing prior to the IPO, whichever is lower (please refer to
page 176 in the Uxin IPO Prospectus).The issuance and grant of
restricted shares to Mr. Dai with the Board’s approval, and his
repayment of loans by surrendering shares to the Company for
cancellation are two completely separate matters involving
different business purposes, conditions and securities involved.
Please refer to the Company’s correspondence with SEC on June 13,
2018 (response to Comment 7 on page 6).
- Allegation of Mr. Kun Dai “netting $180 mln from a
‘forced’ share sale” after IPOAccording to the Schedule
13D filed by Huarong SPV with the SEC on December 26, 2018, and
Schedule 13Gs filed by relevant shareholders with the SEC, before
Uxin’s IPO Huarong SPV provided a loan of US$100 million to Kingkey
New Era Auto Industry Limited (“KK Entity”), an entity jointly
controlled by Mr. Kun Dai and others, and KK Entity used the loan
proceeds to purchase shares issued by Uxin in the second last round
of pre-IPO financing, and pledged all its shares in Uxin to Huarong
SPV to secure the loan.As disclosed in the Schedule 13D filed by
Huarong SPV and the Schedule 13Gs filed by relevant shareholders,
after the Uxin IPO, Huarong SPV and KK Entity signed a supplemental
agreement imposing additional obligations upon KK Entity in
relation to a margin call arrangement including a LTV ratio. As a
result of the volatility of Uxin’s stock price, the LTV ratio rose
above the agreed threshold and the margin call was triggered.
Huarong SPV enforced the margin call arrangement and KK Entity
transferred the pledged 57,045,450 Class A ordinary shares
(representing approximately 6.8% of Uxin’s outstanding Class A
ordinary shares at the time) to Huarong SPV accordingly. When KK
Entity transferred the shares, Huarong SPV did not pay any cash
consideration to KK Entity. In addition, Mr. Kun Dai confirmed that
he did not receive any cash from Huarong SPV upon or subsequent to
the transfer, and that he had never voluntarily sold any shares in
Uxin as alleged in the Report. The allegation that Mr. Kun Dai
“netted $180 mln from a ‘forced’ share sale” is entirely groundless
and speculative.Before the IPO lock-up restrictions expired on
December 25, 2018, to the knowledge of the Company, neither pre-IPO
shareholders nor Huarong SPV converted the ordinary shares they
held in Uxin into ADSs, or sold any ADSs representing Uxin ordinary
shares into the open market before the lock-up restrictions
expired.
False allegation 7: “Well-known in China as
a cheat”Before Uxin entered the used car market, there
were no large-scale inspection or certification services in China’s
used car market, let alone one-stop cross-regional transaction
services. Through years of dedicated effort from Uxin and other
industry players, used car transaction services in China have
gradually evolved and become much more standardized. Today, the
used car market provides consumers with transparent car conditions,
appropriate warranty programs and comprehensive aftersales
services. Uxin has developed a unique and innovative business
model, and is very confident that it has been playing an important
role in the development of China’s used car industry.
Uxin is still developing, and welcomes scrutiny
from consumers and media alike, and is open to any criticism on the
shortcomings of its services. The Company will continue to optimize
its services to meet consumer needs and enhance user
satisfaction.
However, the Company strongly condemns the
publisher of the Report defaming Uxin as “well-known in China as a
cheat.” Uxin has long been upholding its principle that consumers
and integrity come first. Over the past eight years, Uxin has
upgraded its inspection products 8 times, expanded the inspection
check points from 174 to 315, extended its quality-related return
policy from 14 days to 30 days, and expanded warranty coverage from
10 to 15 systems. The Report overlooks the appreciation shown by
consumers, media, industry players and the regulators for Uxin’s
services, and jumps to conclusions simply based on some groundless
articles. It not only defames Uxin, but also misleads the public
and the capital markets.
False allegation 8: “Fake inspection
process”Another one of Uxin’s key competitive advantages
lies in its industry-leading inspection capabilities. The Company
has highly-standardized and strict inspection procedures.
Inspectors have to receive professional training on inspection
techniques and quality control in Uxin College and pass relevant
tests before providing inspection services. By leveraging Uxin’s
inspection devices and systems, such as Check Auto, inspectors can
generate a standardized video inspection report while inspecting
the used car. Please refer to the links below for an introduction
video of Uxin's inspection devices and an example of a video
inspection report. Please note that these videos are in
Chinese.
- Introduction of inspection devices:
www.xin.com/chake_tools.html
- Video inspection report:
https://www.xin.com/rek4jj5kmg/che72959404.html?cityid=909
False allegation 9: “Transaction volume
decline in 2019”China's domestic used car market is marked
by seasonality. Players in the market generally experience low
season in the first half of the year and high season in the second
half. Both dealers' sales and Uxin's transaction volume are subject
to this seasonal influence. As disclosed in the Uxin IPO Prospectus
and its prior quarterly earnings releases, Uxin typically has
relatively lower transaction volume in the first and second
quarters, but significantly higher transaction volume in the third
and fourth quarters. The Report has not only overlooked the
seasonality that applies to both dealers and Uxin, but also only
surveyed dealers in top-tier cities, thus making the results highly
unrepresentative.
As the Company stated in its earnings release
for the fourth quarter of 2018, Uxin expects its total revenues in
the first quarter of 2019 to be in the range of RMB900 million to
RMB950 million, representing year-over-year growth of 39% to 46%,
and quarter-over-quarter decline of 16% to 21%. The revenue
guidance reflects the seasonal factors described above.
False allegation 10: “Holding stakes in
offline dealer”Uxin, Lentuo and Bitauto established a
joint venture in 2014, but the joint venture has never actually
conducted business operations ever since.
About Uxin
Uxin Limited (Nasdaq: UXIN) is the largest used
car e-commerce platform in China. Uxin’s mission is to enable
people to buy the car of their choice, no matter where they are
located or what their budget is. Uxin enables consumers and dealers
to buy and sell cars through an innovative integrated online and
offline platform that addresses each step of the transaction and
covers the entire value chain. Its online presence is bolstered by
an offline network of more than 850 service centers in about 900
cities and regions across China.
Safe Harbor Statement
This announcement contains forward-looking
statements. These statements are made under the “safe harbor”
provisions of the United States Private Securities Litigation
Reform Act of 1995. These forward-looking statements can be
identified by terminology such as “will,” “expects,” “anticipates,”
“future,” “intends,” “plans,” “believes,” “estimates” and similar
statements. Uxin may also make written or oral forward- looking
statements in its periodic reports to the SEC, in its annual report
to shareholders, in press releases and other written materials and
in oral statements made by its officers, directors or employees to
third parties. Statements that are not historical facts, including
statements about Uxin’s beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the
following: Uxin’s goal and strategies; its expansion plans; its
future business development, financial condition and results of
operations; Uxin’s expectations regarding demand for, and market
acceptance of, its services; its ability to provide differentiated
and superior customer experience, maintain and enhance customer
trust in its platform, and assess and mitigate various risks,
including credit; its expectations regarding maintaining and
expanding its relationships with business partners, including
financing partners; trends and competition in China’s used car
e-commerce industry; the laws and regulations relating to Uxin’s
industry; the general economic and business conditions; and
assumptions underlying or related to any of the foregoing. Further
information regarding these and other risks is included in Uxin’s
filings with the SEC. All information provided in this press
release and in the attachments is as of the date of this press
release, and Uxin does not undertake any obligation to update any
forward-looking statement, except as required under applicable
law.
For investor enquiries, please
contact:
Nancy SongUxin Investor RelationsTel: +86 10
5691-6765Email: ir@xin.com
For media enquiries, please
contact:
Yi-Ke HongBrunswick GroupTel: +86 10
5960-8600Email: uxin@brunswickgroup.com
Photos accompanying this announcement are available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/4365d99b-67ad-4cdf-a85e-511814e6f05c
http://www.globenewswire.com/NewsRoom/AttachmentNg/092f0ff5-d627-4e3b-92ed-2d59375b2001
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http://www.globenewswire.com/NewsRoom/AttachmentNg/e11e860f-e9bb-4ad2-8f4e-7ec7d7db86f1
http://www.globenewswire.com/NewsRoom/AttachmentNg/8485f52d-d5d5-4e2c-a951-2f57181bdaf4
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