(with pictures from Canva)
Editor's note: this article comes from the start-up state column leek finance and economics.
The cold winter and the scorching sun on the one hand is a true portrayal of the domestic car market in 2018. This year, the domestic auto market suddenly encountered a cold winter, and the auto market also ushered in its first decline in 28 years. At the same time, the used car market is booming. According to the China Automobile Association, a total of 28.08 million cars were sold in 2018, down 2.8% from a year earlier, but used car sales rose 11.46% against the trend, a situation that continued in 2019.
Car sales declined further in 2019, with total sales of 25.77 million vehicles that year, down 8.2% from the same period last year. Although the volume of used car transactions continued to grow, the growth rate slowed significantly. However, affected by the epidemic this year, the used car market is also in the doldrums, and second-hand car dealers are also gradually feeling the impact of the cold winter in the car market.Youxin used carIt is more obvious in the financial report.Rapid "definancialization" transformation in the cold winter
The results show that Youxin's revenue from April 1 to June 30, 2020 was 62.2 million yuan, down 85% from 389.3 million yuan in the same period last year. The decline in Youxin's revenue, on the one hand, is related to the continuation of the cold winter of the car market; on the other hand, it also has something to do with the impact of the epidemic.
The outbreak of COVID-19 epidemic in early 2020 has had a great impact on all industries, especially on the already depressed automobile industry. In the first half of 2020, car sales were 10.257 million, down 16.9% from the same period last year, while the cumulative trading volume of used cars was 5.5164 million, down 19.61% from the same period last year, according to the Federation of passengers.
Under the influence of the epidemic, the used car market, which had a small growth in 2019, fell into a complete dilemma. According to Youxin's financial report, as of June 30, the 2C transaction volume was 3887, down from 24585 in the same period last year; the total 2C transaction volume was 426 million yuan, down from 2.864 billion yuan in the same period last year; and 2C business revenue was 51.7 million yuan, down from 341 million yuan in the same period last year.
There are two main reasons for the cliff decline in 2C trading volume: on the one hand, the economic downturn caused by the epidemic has led to an increase in unemployment and a decline in national income, and the plan to buy a car, which is not a survival consumption, has been naturally delayed; on the other hand, as the company has upgraded its trading process from financial-driven to product-service-driven, it takes a certain amount of time to adapt, so the decline in C-end business is not difficult to understand.
Specifically, finance has always been an important engine for the growth of Youxin's used car business, but due to the increasingly stringent supervision of finance and the strengthening of the negative impact of finance on Youxin, the role of financial engine has been weakened and financial risks are on the rise. so Youxin has to speed up the "definancialization".
In fact, since 2018, under the strong financial policy, Internet giants have set off an upsurge of "definancialization". The used car platform is easily dragged down by financial business, which leads to the accumulation of "bad debts", which undoubtedly increases the operational risk of the platform. Therefore, the "de-financialization" of used cars is even more urgent, and Youxin's quarterly results directly revealed this phenomenon.
Youxin disclosed a quarterly loss of 2 billion yuan in the last quarter, largely due to financial guarantees. The direct impact of Youxin's divestiture of second-hand car financial business is that the national purchase business has gradually become the main business of Youxin. However, based on Youxin's current situation of more losses and less profits over the years, the national purchase has so far failed to reverse its losses.It is difficult to buy all over the country to help Youxin out of difficulties.
National purchase is a brand-new car purchase model initiated by Youxin, which has been established as a strategic focus by Youxin as early as 2017 and has been officially launched since 2018.
This business model, which is the first in the industry, was established to help consumers break the restrictions on the trading area of second-hand cars and buy cars in different places. Now, after three years of development, the national purchase is becoming more and more mature, and it has begun to attract more and more car dealers and consumers to trade on Youxin platform.
Youxin's total revenue in 2019 was 1.588 billion yuan, an increase of 140.9 percent over the same period last year, and its annual gross profit was 899 million yuan, an increase of 274.1 percent over the same period last year 2C the national purchase transaction volume reached 97000 vehicles, an increase of 153.8% over the same period last year. The revenue of B2C business was 1.347 billion yuan, an increase of 264.5% over the same period last year. The substantial increase in Youxin's profit this time has something to do with the increase in transaction volume and unit price of its core business nationwide purchase.
After "de-financialization", Youxin business began to shift from 2B to 2C, which is the focus of the current development of Youxin. However, judging from the financial results in recent years, even though Youxin's total revenue was more than 100 million yuan and maintained a trend of continuous growth from 2016 to 2019, it is still difficult to solve the problem of Youxin's losses for many years.
In fact, not only Youxin, the entire second-hand car industry has also been in the stage of burning money, in which marketing advertising expenses is the "main force of burning money." According to data from iResearch Market Consulting, the total amount of used car e-commerce advertisements exceeded 850 million yuan in 2015 and reached 1.2 billion yuan in 2016. The advertising campaign continued to escalate in 2017, with a total investment of more than 5 billion yuan, and is expected to exceed 20 billion yuan for the whole of 2018. A huge amount of marketing advertising has led to few profits from second-hand car dealers in the industry, and Youxin is no exception, and years of losses have also made Youxin's capital chain very tight.
Perhaps aware of the tight capital chain, Youxin began to reverse the predicament through the strategy of increasing revenue and reducing expenditure this year. Specifically, in terms of cost-cutting, Youxin has been optimizing various costs; on the other hand, Youxin has been open-source through self-built inventory of used cars, in order to reduce operating losses, so as to achieve the purpose of profit. However, judging from the current overall second-hand car market environment, I am afraid the improvement is limited.There is not much time left for Youxin.
In fact, Youxin has been doing the action of increasing revenue and reducing expenditure. At the beginning of this year, due to the impact of the epidemic, Youxin issued a notice of suspension to some employees, resulting in a significant reduction in salaries and benefits as a result of the company's termination of some employee contracts, resulting in significant savings. According to the financial report, the sales and marketing expenses of Youxin Group in the first quarter of 2020 were 189.5 million yuan, down 45.2 per cent from the same period last year. General and administrative expenses were 74.9 million yuan, down 13.8% from the same period last year.
While cutting expenditure, Youxin is also actively "open source". Since Youxin's financial business was spun off, the responsibility of making a profit has fallen on the shoulders of the whole country. So from September this year, Youxin is going to build its own inventory of used cars and establish a "national direct purchase + self-built logistics" system, trying to break the limitations of intra-city transactions and build its own competition barriers.
At present, it is difficult to see the concrete results of these actions, because fundamentally, the essence of self-built used car inventory is to promote sales, but the prospect of its sales in the car market is not clear in the cold winter.
In addition, the epidemic has led to a reduction in people's consumption level, the operation of the car market is bleak, new cars cannot be sold, second-hand cars depreciate faster, and sales are even more difficult. In addition, the implementation of Youxin's "de-financialization" this year has also deterred some people who want loans to buy cars. In fact, although the used car market is bleak, there is also a positive side.
Recently, the state's favorable policies such as "activating the second-hand car market" and "National eight articles" have successively landed, and barriers such as "restrictions on relocation" that restrict the development of second-hand cars have been gradually broken, and the situation of used cars in China is very good. Youxin obviously wants to take advantage of the country's east wind to share this big cake.
In the final analysis, Youxin self-built second-hand car inventory is a manifestation of its active layout of the industry. However, the self-built used car inventory is basically to invigorate the stock and pull the increment, but in the current environment, what is the impact of self-built used car inventory on the growth of Youxin business? It still needs to be tested by the market. For now, it is essential for Youxin to stabilize the national purchasing business and increase sales, but this is obviously not easy to do.
In addition, the problems existing in the used car industry, such as non-standard industry, non-uniform evaluation, lagging laws and regulations, and incomplete information, still occur from time to time, which means that the next development of Youxin will not be smooth. For the current Youxin, the outside world does not have much time left for it.
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