“Science and Technology Innovation Board Daily”, March 19 (Reporter Chen Mei) Recently, used car retailer Youxin Group announced the signing of a letter of intent to invest. According to SEC documents, Dai Kun, the founder, chairman and CEO of the company, and NC Fund will jointly invest about US$34.8 million, or approximately RMB 250 million, in Youxin Group.

The “Science and Technology Innovation Board Daily” reporter noticed that NC Fund is an investment fund focusing on automobile-related industries, and this investment is currently in the intended stage. Relevant sources revealed to the “Science and Technology Innovation Board Daily” reporter that NC Fund is actually NIO's capital. In response, the reporter sought evidence from NIO Capital. However, at the time of publication, no response had been received.

NC Fund or NIO Capital

According to SEC documents, NC Fund now plans to subscribe at a price of 0.004858 US dollars per share. After conversion, it is equivalent to 1.4574 US dollars per American Depository (ADS) share.

In 2018, when Youxin landed on NASDAQ, the issue price was $9 per ADS share, but there was a stock reduction in the middle. This may be equivalent to NC Fund “cutting the bottom” of Youxin at a lower price.

Although NIO Capital did not respond to related questions, in SEC documents, the “Science and Technology Innovation Board Daily” reporter discovered that NC Fund has two investors in the SEC. One is an opportunity fund and the other is a venture fund. Both funds declined to disclose the size of the investment.

In February of this year, NIO Capital raised more than 3 billion yuan, focusing on investments in the NEV industry ecosystem, etc. Meanwhile, at the same time as NIO Capital announced the completion of fund-raising, its managed industry fund also received support from state-owned assets departments at various levels in Anhui and Jiangsu provinces. The fund size changed from 900 million yuan to 3.08 billion yuan.

Prior to Youxin's announcement of this new investment, Youxin signed an equity investment agreement with Hefei Construction Investment Beicheng Industrial Investment Co., Ltd. (hereinafter referred to as “Hefei Construction Investment”) in September 2023.

Hefei Construction Investment promised to invest up to 1.5 billion yuan in installments in Youxin (Hefei) Automobile Intelligent Remaneling (“Youxin Hefei”) over the next 10 years.

The relevant person mentioned above told the “Science and Technology Innovation Board Daily” reporter that the investment was mediated by NIO Capital. The close relationship between NIO Auto and Hefei has always been well known. The implementation of the former made Hefei the “best venture capital city” in one fell swoop; Li Bin also became a “senior investment specialist in Hefei.”

According to information, with the help of NIO Capital, 450 companies have now set up production in Hefei.

Exploring a new model for the used car business

For Youxin, NIO Capital is an old friend. As early as 2021, NIO Capital took a stake in Youxin, along with Pleasure Capital.

At the time, the two institutions made a joint investment of 315 million US dollars. Meanwhile, 58 Group, TPG, and Huaping convertible bondholders held a total of 69 million US dollars of convertible bonds and converted them into ordinary Class A shares of the company.

In 2022, NIO Capital and Pleasure Capital continued to increase, strategically investing 100 million US dollars in Youxin. However, after the investment was completed, Youxin still did not overcome the difficulties of the used car business model. According to financial data, since its launch in 2018, Youxin lost 1,538 billion yuan; in 2019, the loss increased to 1,989 million yuan; from 2021 to 2023, it also lost 421 million yuan, 143 million yuan, and 137 million yuan, respectively.

The business did not turn around until the Q2 quarter of fiscal year 2024 (July to September 2023). Youxin said that retail transactions increased 35.6% month-on-month in the fiscal quarter, and Youxin's “online national purchase+offline hypermarket” model has been verified, and it is expected that the company's overall EBITDA profit will be achieved within 2024.

The reporter learned that Youxin's big store in Xi'an achieved EBITDA correction in September 2023; the big store in Wushan, Hefei is expected to achieve EBITDA correction by the end of March 2024.

In response, the relevant person mentioned above told the “Science and Technology Innovation Board Daily” reporter that the turning point in the business represents the initial success of Youxin's exploration of a new used car business model.

“As we all know, the used car market has always had the problem of unclear business models. In this regard, neither Youxin nor Melon Zu have come out. But that doesn't mean this market doesn't have opportunities.” The source said that at present, Youxin's positioning is no longer a used car matching transaction, but a store model.

Jiang Han, a senior researcher at the Pangu think tank, said in an interview with the “Science and Technology Innovation Board Daily” reporter that the used car market trading situation and industry development status are diverse. “The two major stores have successively adjusted their EBITDA, which means that Youxin's business model in specific regions is gradually maturing and can sustain itself and generate profits.”

“However, whether the success of this business model can comprehensively solve the pain of the Youxin Used Car business model also requires observing its implementation effect and sustainability on a wider scale.” Jiang Han thinks.

The various actions of various types of capital

Before NC Fund planned to invest in Youxin, it had invested in Youxin's 58 Tongcheng, NIO Capital, and Happy Capital, all of which developed different investment “strategies”.

Take 58 Tongcheng as an example. After investing in Youxin in 2019, they also bought Ushinpai for 150 million US dollars in 2020. As a result, Youxin cut out the financial business, which consumes cash flow, and 58 Tongcheng relied on the traffic charging model to enter the used car auction business.

In 2020, it entered Youxin's NIO Capital and continued to “rescue” Youxin. According to an SEC document, Youxin signed an outstanding long-term debt transfer agreement with a wholly-owned subsidiary of NIO Capital in April 2023. After signing, the long-term debt will be transferred to NIO Capital, amounting to US$61.6 million.

Located in the Youxin hypermarket in Hefei, it has a total construction area of 450,000 square meters. It has the world's most advanced intelligent used car remanufacturing plant and the world's largest used car retail store. It is expected to become an important engine for the growth of Youxin's business in the next few years.

As a “key” person, Li Bin is also one of the managers of Nio Capital II LLC (Nio Capital II LLC).

In terms of Happy Capital, it participated in Youxin's financing of US$315 million and US$100 million in 2021 and 2022, respectively. At the time, Youxin's stock price was already low.

According to SEC documents, in August 2023, Pleasure Capital also fully exercised warrants to subscribe for 210 million senior convertible preferred shares, with a total amount of US$10 million, at a price of US$1.37 per ADS share. Currently, Youxin's stock price is $2.18/ADS.

On the website of the Jinjiang Municipal People's Government in Quanzhou City, Fujian Province, the reporter saw that Youxin will launch an intelligent manufacturing industrial park project to upgrade the automobile ecosystem. According to reports, the project plans to invest 500 million yuan to build a super used car trading complex integrating used car remanufacturing, display, delivery and after-sales service.

At the same time, Pleasure Capital's Quanzhou New Kinetic Energy Industry Fund was established with a target size of 2 billion yuan, and the initial scale of the fund is 500 million yuan. The fund will invest in enterprises related to the automobile industry chain, new energy, new technology, and new kinetic energy.