The boom in used cars is an inevitable trend in new consumption

Over the weekend, I saw a pair of young consumers in the supermarket. They bought quite a few high-priced items, but they always compared prices on e-commerce or other supermarket apps before filling their shopping cart, afraid of overpaying. This phenomenon is also reflected in ordering takeout, buying clothes, and even car purchases. Take car buying as an example: even if you resell a new car immediately after purchase, you'll have to take a 10% discount. For domestic car buyers, the price of used cars is indeed unbeatable.

By the end of 2025, China's motor vehicle ownership reached 469 million (including 366 million cars). Data released this month by the China Automobile Dealers Association shows that last year's cumulative used car transactions reached 20.108 million, a year-on-year increase of 2.52%.

In the third quarter of last year, domestic used car transactions reached 5.1627 million, up 4.24% month-on-month and 6.8% year-on-year. The third-quarter report of Uxin, a used car dealer listed in the U.S., showed that the company's total used car transactions in Q3 were 15,904, up 37% month-on-month and 125.7% year-on-year; retail transactions were 14,020, up 35% month-on-month and 133.5% year-on-year. Uxin's used car transaction volume far exceeded the industry average growth rate.

At the Q3 earnings conference, Uxin also provided quite positive guidance. Uxin expects Q4 used car retail transactions to be between 18,500 and 19,000 (up 30%+ month-on-month and 100%+ year-on-year), with total revenue reaching 1.15 to 1.18 billion yuan. Full-year retail transactions are expected to exceed 50,000, with annual revenue exceeding 3.2 billion yuan. Stimulated by the positive earnings forecast, Uxin's stock price has clearly trended upward since late December.

In the short term, the "trade-in" policy will remain an important driver of used car transactions. This year, to qualify for the scrapping subsidy, buyers must purchase new energy passenger vehicles or fuel-powered passenger vehicles with a displacement of 2.0 liters or less included in the "Catalog of New Energy Vehicle Models Exempt from Vehicle Purchase Tax." The subsidy is 12% of the new energy vehicle price (capped at 20,000 yuan) or 10% of the fuel-powered vehicle price (capped at 15,000 yuan). For vehicle replacements, buyers must purchase new energy passenger vehicles or fuel-powered passenger vehicles with a displacement of 2.0 liters or less included in the catalog, with subsidies of 8% (capped at 15,000 yuan) and 6% (capped at 13,000 yuan), respectively.

Compared to the fixed-amount subsidy method in 2025, 2026 will switch to a subsidy calculated as a percentage of the vehicle price. This means buying a 200,000-yuan new energy vehicle will yield 4,000 yuan more for scrapping than for replacement. But for a 150,000-yuan fuel-powered vehicle, the difference narrows to 1,200 yuan. For households with cars over ten years old, scrapping is clearly more cost-effective. But for used cars aged 1-5 years, replacement is the better option.

A report from Autohome Research Institute shows that the average age of used cars last year was 5.2 years, with 1-5-year-old used cars accounting for about 47% (the proportion of 3-5-year-old used cars increased). Due to this year's policy adjustments, the proportion of users choosing "trade-in" over scrapping may increase compared to last year.

Data disclosed at the beginning of the year also supports this. Weekly data from the China Automobile Dealers Association shows that the average daily used car transactions in the first few weeks of this year were significantly higher than in December last year, possibly indicating strong Q1 retail transactions for Uxin this year.

Affected by the new car "price war" and the introduction of replacement subsidies, the average transaction price of used cars in 2025 has declined compared to 2024.

However, Uxin's gross margin has risen instead of falling. In Q3 2025, Uxin's gross margin reached a historical high of 7.5%, indirectly verifying that the cost advantages of its "offline warehouse supermarket + online nationwide purchase" model are gradually accumulating, with good replicability and expansion potential.

On December 27, Uxin Group signed a $50 million financing agreement with NIO Capital and Prestige Shine Investment Fund. The funds will be used to launch 4 to 6 new supermarkets this year (each with an inventory of 1,000 to 3,000 vehicles). This move is expected to effectively enhance Uxin's market share in used car transactions.

From another perspective, the passenger car industry is firmly "anti-involution," and senior officials have named several automakers engaged in excessive price competition. Since the beginning of this year, automakers have not engaged in large-scale price promotions, and Uxin's used car gross margin is expected to remain stable or increase.

The used car transaction chain is long and involves many steps, with information asymmetry among parties, making it a typical non-standard product. The biggest concern for consumers buying used cars is a lack of trust—fear of buying accident or flood-damaged cars at low prices or "one-time deals" with no after-sales service.

In recent years, China's new energy used car transactions have surged, and potential buyers' concerns about battery range have also grown.

All vehicles in Uxin's warehouse supermarkets undergo 315 inspections at its refurbishment factory. The company pioneered a "10-year return policy" for major accident cars, odometer-tampered cars, and flood-damaged cars, addressing long-standing industry pain points like hidden vehicle conditions and price opacity. Uxin's strong used car transaction volume indirectly proves that its supermarket model enhances trust and solves transaction pain points.

Since 2021, due to policies like the "national unified market," cross-province used car registration has been fully implemented, and private car annual inspections have been relaxed, leading to an increase in China's used car transfer rate. In December last year, the transfer rate rose to 34.9%.

The "Notice on Implementing Large-Scale Equipment Updates and Consumer Goods Trade-In Policies in 2026" issued earlier this year mentioned standardizing second-hand goods transactions and remanufacturing of used equipment; encouraging the "Internet + second-hand" model; supporting regions with conditions to build centralized and standardized second-hand goods markets; and improving systems for used goods trading and appraisal.

In 2025, Uxin's used car transactions accounted for less than 1% of the domestic total. Under the trend of stricter regulation, Uxin is expected to have significant growth potential with its barriers of "Internet + supermarkets + after-sales service." $Uxin(UXIN.US)