Uxin Limited
Annual Report 2018

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 20-F (Mark One) ooREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGEACT OF 1934 OR xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018. OR ooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 For the transition period from to OR ooSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . . Commission file number: 001-38527 Uxin Limited(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English) Cayman Islands(Jurisdiction of incorporation or organization) 2-5/F, Tower E, LSHM Center,No. 8 Guangshun South Avenue,Chaoyang District,Beijing, 100102People’s Republic of China(Address of principal executive offices) Zhen Zeng, Chief Financial OfficerTelephone: +86 10 5631-2700Email: ir@xin.com 2-5/F, Tower E, LSHM Center,No. 8 Guangshun South Avenue,Chaoyang District,Beijing, 100102People’s Republic of China(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each className of each exchange on which registeredAmerican depositary shares (one Americandepositary share representing three Class A ordinaryshares, par value US$0.0001 per share)The Nasdaq Stock Market LLC(The Nasdaq Global Select Market)Class A ordinary shares, par valueUS$0.0001 per share*The Nasdaq Stock Market LLC (The NasdaqGlobal Select Market) * Not for trading, but only in connection with the listing on The Nasdaq Global Select Market of American depositary shares. Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Table of Contents Indicate the number of issued and outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by theannual report.839,850,038 Class A ordinary shares (excluding the 23,520,495 Class Aordinary shares issued to the depositary bank for bulk issuance of ADSsreserved for future issuances upon the exercise or vesting of awards grantedunder the Share Incentive Plan) and 40,809,861 Class B ordinary shares, parvalue US$0.0001 per share, as of December 31, 2018. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.o Yes x No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934.o Yes x No Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.x Yes o No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).o Yes o No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See thedefinitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer o Non-accelerated filer x Emerging growth company x If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected notto use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of theExchange Act. o † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP x International Financial Reporting Standards as issuedby the International Accounting Standards Board o Other o If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.o Item 17 o Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o Yes x No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes o No Table of Contents TABLE OF CONTENTS INTRODUCTION1FORWARD-LOOKING INFORMATION2PART I3Item 1.Identity of Directors, Senior Management and Advisers3Item 2.Offer Statistics and Expected Timetable3Item 3.Key Information3Item 4.Information on the Company50Item 4A.Unresolved Staff Comments84Item 5.Operating and Financial Review and Prospects84Item 6.Directors, Senior Management and Employees109Item 7.Major Shareholders and Related Party Transactions118Item 8.Financial Information121Item 9.The Offer and Listing122Item 10.Additional Information123Item 11.Quantitative and Qualitative Disclosures about Market Risk135Item 12.Description of Securities Other than Equity Securities136PART II138Item 13.Defaults, Dividend Arrearages and Delinquencies138Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds138Item 15.Controls and Procedures138Item 16A.Audit Committee Financial Expert140Item 16B.Code of Ethics140Item 16C.Principal Accountant Fees and Services140Item 16D.Exemptions from the Listing Standards for Audit Committees140Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers140Item 16F.Change in Registrant’s Certifying Accountant140Item 16G.Corporate Governance140Item 16H.Mine Safety Disclosure141PART III142Item 17.Financial Statements142Item 18.Financial Statements142Item 19.Exhibits142SIGNATURES148 iTable of Contents INTRODUCTION Unless otherwise indicated or the context otherwise requires, references in this annual report to: · “Active dealers” in a given period are to dealers who bid for cars through our 2B business, or dealers who list cars for sale through either our 2Bbusiness or our 2C business during that period. If a dealer bids cars through our 2B business and also lists cars for sale through either our 2B orour 2C business, all in the same period, such dealer will be counted as two active dealers for the period; · “ADSs” are to the American depositary shares, each of which represents three Class A ordinary shares, par value US$0.0001 each; · “CAGR” are to compound annual growth rate; · “Car PARC” are to the total number of light vehicles, including cars, sport utility vehicles and light trucks in a region or market; · “Check Auto” are to our proprietary car inspection system; · “China” or “PRC” are to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, Hong Kong, and Macau; · “cross-regional transactions” are to the transactions completed on our platform where the buyer completes the purchase of a car without havingphysically inspected the car on-site, which primarily comprise transactions where the buyer is located in a different city from the car purchased; · “GMV” are to gross merchandise value of used cars as measured by gross selling price of used cars, excluding service fees and interests (if any)charged, and “total GMV” are to the GMV of our 2C and 2B businesses; the GMV of our 2C business also includes certain free-of-charge intra-regional transactions we facilitate without financing solutions attached; · “RMB” and “Renminbi” are to the legal currency of China, which is our reporting currency; · “shares” or “ordinary shares” are to our Class A and Class B ordinary shares, par value US$0.0001 per share; · “US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States; · “Uxin” or “our platform” are to our platform primarily for buying and selling used cars, which primarily consists of two businesses, UxinAuction and Uxin Used Car; · “Uxin Auction” are to our 2B business; · “Uxin Used Car” are to our 2C business; · “Our WFOEs” are to our wholly-owned subsidiaries in China; · “Our VIEs” are to our variable interest entities, which are Youxin Internet (Beijing) Information Technology Co., Ltd. or Youxin Hulian,Beijing Fengshun Lubao Automotive Auction Limited, or Fengshun Lubao, and Youxin Yishouche (Beijing) Information TechnologyCo., Ltd., or Yishouche; and · “we,” “us,” “our company” and “our” are to Uxin Limited, our Cayman Islands holding company, and its subsidiaries, and its consolidatedaffiliated entities in the PRC. 1Table of Contents Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at a rate ofRMB6.8755 to US$1.00, the exchange rate on as of the end of December 2018 set forth in the H.10 statistical release of the Board of Governors of the FederalReserve System. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi,as the case may be, at any particular rate, or at all. FORWARD-LOOKING INFORMATION This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. Thesestatements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-lookingstatements by terminology such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,”“continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about futureevents and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include statements relating to, among other things: · our goals and strategies; · our ability to retain and increase the number of customers on our platform and for our services, and expand our service offerings; · our ability to provide quality services and compete effectively; · our ability to effectively manage risks, including credit risks and fraud risks; · our future business development, financial condition and results of operations; · expected changes in our revenues, costs or expenditures; · the expected growth of, and trends in, the market for our services; · our expectations regarding demand for and market acceptance of our services; · competition in our industry; · relevant government policies and regulations relating to our industry; and · general economic and business conditions globally and in China. We would like to caution you not to place undue reliance on these forward-looking statements and you should read these statements in conjunctionwith the risk factors disclosed in “Item 3. Key Information—D. Risk Factors.” Those risks are not exhaustive. We operate in an evolving environment. Newrisks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business orthe extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. We do notundertake any obligation to update or revise the forward-looking statements except as required under applicable law. You should read this annual report andthe documents that we reference in this annual report completely and with the understanding that our actual future results may be materially different fromwhat we expect. 2Table of Contents PART I Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable Not applicable. Item 3. Key Information A. Selected Financial Data The selected consolidated statements of operations data for the years ended December 31, 2016, 2017 and 2018, selected consolidated balancesheets data as of December 31, 2017 and 2018 and selected consolidated cash flow data for the years ended December 31, 2016, 2017 and 2018 have beenderived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The selected consolidatedbalance sheets data as of December 31, 2016 have been derived from our audited consolidated financial statements for the year ended December 31, 2016,which are not included in this annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historicalresults do not necessarily indicate results expected for any future periods. You should read this Selected Financial Data section together with ourconsolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”included elsewhere in this annual report. The following table presents our selected consolidated statements of comprehensive loss data for the years ended December 31, 2016, 2017 and2018: For the Year Ended December 31,(in thousands, except for share data)20162017 2018RMBRMB RMB US$Selected Consolidated Statements of Operations Data:Revenues:To consumers (“2C”) — intra-regional—Transaction facilitation revenue81,807230,250481,05570,092—Loan facilitation revenue314,172944,4061,564,620227,972To consumers (“2C”) — cross-regional—Transaction facilitation revenue——164,28023,936—Loan facilitation revenue——209,44530,517To businesses (“2B”)—Transaction facilitation revenue293,224519,276606,59988,384Others135,298257,440289,45042,174 Total Revenues824,5011,951,3723,315,449483,075Cost of revenues(533,371)(747,788)(1,138,995)(165,957) Gross profit291,1301,203,5842,176,454317,118 Operating expenses:Sales and marketing(793,521)(2,203,139)(2,686,956)(391,502)Research and development(167,791)(226,010)(329,430)(47,999)General and administrative(583,697)(599,905)(1,724,060)(251,204)Gains/(losses) from guarantee liability1,9832,284(1,931)(281) Total operating expenses(1,543,026)(3,026,770)(4,742,377)(690,986) 3(1)(1)(1)(1)Table of Contents For the Year Ended December 31,(in thousands, except for share data)20162017 2018RMBRMB RMB US$Loss from operations(1,251,896)(1,823,186)(2,565,923)(373,868) Loss from operationsInterest income/(expenses), net677(30,183)(120,453)(17,550)Other expenses, net(16,127)(12,112)(16,813)(2,450)Foreign exchange gains/(losses)1,918477(8,232)(1,199)Fair value change of derivative liabilities(116,056)(885,821)1,185,090172,673 Loss before income tax expense(1,381,484)(2,750,825)(1,526,331)(222,394)Income tax expense(1,805)(570)(14,585)(2,125)Equity in (losses)/income of affiliates(9,637)3,5972,631383 Net loss(1,392,926)(2,747,798)(1,538,285)(224,136) Less: net loss attributable to non-controlling interests shareholders(35,181)(25,202)(15,771)(2,298)Net loss attributable to UXIN LIMITED(1,357,745)(2,722,596)(1,522,514)(221,838) Net loss attributable to ordinary shareholders(1,775,663)(3,773,205)(2,386,238)(347,687) Net loss per share attributable to ordinary shareholders—Basic(36.11)(76.51)(4.99)(0.73)—Diluted(36.11)(76.51)(4.99)(0.73)Weighted average number of ordinary shares used in computing netloss per share, basic and diluted49,174,85049,318,860477,848,763477,848,763 (1) Share-based compensation in the amount of RMB226.4 million, RMB165.9 million and RMB1,052.0 million (US$153.3 million) in 2016, 2017 and2018, respectively, was charged to cost of revenues, sales and marketing expenses, research and development expenses, and general and administrativeexpenses. The following table presents our selected consolidated balance sheets data as of December 31, 2016, 2017 and 2018: As of December 31,20162017 2018RMBRMB RMB US$(in thousands, except for share data)Selected Consolidated Balance Sheets Data:Cash and cash equivalents332,259291,973800,997116,709Restricted cash705,8541,617,2302,013,030293,308Advance to sellers45,774246,287692,714100,932Financial lease receivables, net413,462438,693294,51142,912Total assets2,317,9795,298,9137,349,3901,070,840 Convertible notes——1,188,192173,125Short-term borrowings204,068426,783624,58891,005Guarantee liabilities76,325173,907321,25546,808Derivative liabilities654,5111,596,424——Total liabilities1,986,1945,059,8944,977,747725,280 Total Mezzanine equity4,775,6378,420,644——Total shareholders’ (deficit)/equity(4,443,852)(8,181,625)2,371,643345,560Capital Stock303057584Number of outstanding ordinary shares49,318,86049,318,860880,659,899880,659,899 4Table of Contents The following table presents our selected consolidated statements of cash flow data for the years ended December 31, 2016, 2017 and 2018: For the Year Ended December 31,20162017 2018RMBRMB RMB US$(in thousands)Selected Consolidated Statements of Cash Flow Data:Net cash used in operating activities(661,210)(1,834,243)(2,281,333)(332,400)Net cash generated from / (used in) investing activities9,341(1,498,219)(1,474,417)(214,829)Net cash (used in) / generated from financing activities(133,001)3,288,8424,274,052622,748Effect of exchange rate changes on cash and cash equivalents6,4643,334(9,278)(1,352)Net (decrease)/increase in cash and cash equivalents(778,406)(40,286)509,02474,167Cash and cash equivalents at beginning of the year1,110,665332,259291,97342,542Cash and cash equivalents at end of the year332,259291,973800,997116,709 B. Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors Risks Related to Our Business and Industry If we fail to provide a differentiated and superior customer experience, the size of our customer base and the number of transactions on our platformcould decline, and our business would be materially and adversely affected. Providing a differentiated and superior used car transaction experience for our customers, including both consumers and businesses, is critical to ourbusiness. Our ability to provide a high-quality customer experience depends on a number of factors, including: · our ability to improve our existing service offerings and upgrade our platform; · our ability to meet the diverse needs of our customers with ongoing innovation and new service offerings; · our ability to maintain and improve operating efficiency and service quality of our offline networks and personnel; · our ability to leverage technology and data to improve our services; · our ability to adequately train and manage our employees; and · our ability to effectively ensure the quality of services provided by our third-party service providers on our platform. We cannot guarantee that we can provide a differentiated and superior experience to our customers as our business continues to evolve. Our failureto do so would materially and adversely affect our business, financial condition and results of operations. 5Table of Contents Failure to maintain or enhance customer trust in us could damage our reputation, reduce or slow the growth of our customer base, which could harmour business, financial condition and results of operations. Our reputation as a trusted transaction platform is critical to our success. If we fail to maintain a high level of customer trust in our services, ourbusiness, financial condition and results of operations could be materially and adversely affected. We provide and work with third parties to provide many services through our platform, such as car delivery and warranty services, which are the keyto earn customer trust. If we fail to maintain a high level of customer satisfaction or fail to properly manage our car delivery and warranty or other services,our business, financial condition and results of the operations would be adversely affected. Starting from December 2018, we have adopted a franchisedmodel to complement our self-operated service centers in the effort to effectively expand our service centers across China. We currently have more than 1,300service centers, among which more than 700 are operated by our third-party local partners. We provide trainings to our local partners and require them tooperate the service centers in line with our operating and customer servicing standards. However, if these service centers fail to maintain a high level ofperformance consistent with our requirements, the level of customer satisfaction and trust we enjoy may be harmed, and our business, financial condition andresults of the operations may be adversely affected. We have received in the past, and we may continue to receive in the future, communications or complaints alleging that cars listed on or soldthrough our platform by dealers or other sellers are defective, inconsistent with car information provided on our platform, or the services provided by ourthird-party service providers are unsatisfactory to our customers. The information we include in our car listings is collected and maintained by us, which maynot be accurate or complete due to human error, technological issues or willful misconduct. Moreover, if auto dealers experience difficulties in meeting ourrequirements or standards or provide inaccurate or unreliable information to us, we may be subject to legal liabilities for the actions or services of these autodealers and we may fail to maintain customer trust in our platform, which may adversely affect our business, financial condition and results of the operations. We face intense competition, which may lead to loss of market share, reduced service fees and revenue, increased expenses, departures of qualifiedemployees, and disputes with competitors. We face intense competition in the used car industry both online and offline. Our competitors may have significantly more resources than we do,including financial, technological, marketing and others and may be able to devote greater resources to the development and promotion of their platformsand services. As a result, they may have deeper relationships with auto dealers, auto financing partners and other third-party service providers than we do.This could allow them to develop new services, adapt more quickly to changes in technology and to undertake more extensive marketing campaigns, whichmay render our platform less attractive to consumers and businesses and cause us to lose market share. Moreover, intense competition in the markets weoperate in may reduce our service fees and revenue, increase our operating expenses and capital expenditures, and lead to departures of our qualifiedemployees. We may also be harmed by negative publicity instigated by our competitors, regardless of its validity. We are currently subject to an ongoingunfair competition claim, and we have encountered and may in the future continue to encounter other disputes with our competitors, including lawsuitsinvolving claims asserted under intellectual property laws, unfair competition laws and defamation which may adversely affect our business and reputation.Failure to compete with current and potential competitors could materially harm our business, financial condition and our results of operations. We are exposed to credit risk as we provide guarantees to our third-party financing partners on all consumer auto loans facilitated through our 2Cbusiness and loans to selected dealers and consumers. Our current risk management system may not be able to accurately assess and mitigate all risksto which we are exposed, including credit risk. We are exposed to credit risk as we are required to provide guarantees to our third-party financing partners on all consumer auto loans facilitatedthrough our 2C business. We are also exposed to credit risk with respect to our dealer-oriented inventory financing product, Easy Loan program, and loans weprovide directly to selected consumers using our own funds starting from late 2018. See “Item 4. Information on the Company—B. Business Overview—OurPlatform and Services—Our 2C business —Consumer auto loan facilitation services” and “Item 4. Information on the Company—B. Business Overview—Business—Others.” The delinquency rates by loan balance as of December 31, 2016 for the used car loans that were 1 to 29, 30 to 59, 60 to 89 and 90 or morecalendar days past due were 0.18%, 0.17%, 0.11% and 0.14%, respectively. The delinquency rates by the same measure were 0.68%, 0.40%, 0.22% and1.37% as of December 31, 2017, and were 0.75%, 0.49%, 0.21% and 1.41% as of December 31, 2018, respectively. See “Item 5. Operating and FinancialReview and Prospects—A. Operating Results—Selected Statements of Operations Items—Gains/(losses) from guarantee liability.” Consumers and dealersmay default on their loans for a number of reasons including those outside of their or our control. We are also exposed to risk if users of our platformfraudulently apply for auto loans with no intent of repayment, often involving collusion between the buyer and seller where the transaction price for the car isfraudulently high or by faking identities and loan application materials. Such risks are exacerbated in consumer auto financing due to the relatively limitedcredit history and other available information of many consumers in China. Since the second quarter of 2018, we ceased the practice of collecting interest onbehalf of the financing partners, which may impact our ability to recover the amount of interest and loan principal due in the event borrowers fail to repay. 6Table of Contents The credit performance of the consumer auto loans facilitated through our platform directly affects the recognition of (losses)/gains from guaranteeliability on the financial statements and our results of operations. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Selected Statements of Operations Items—Gains/(losses) from guarantee liability” We have experienced incidents that led to losses in the past. As ofDecember 31, 2016, 2017 and 2018, our total guarantee liabilities were RMB76.3 million, RMB173.9 million and RMB321.3 million (US$46.8 million),respectively. The total outstanding principal balance of loans that we facilitated through our platform as of December 31, 2016, 2017 and 2018 reachedRMB5.3 billion, RMB14.8 billion and RMB27.6 billion (US$4.0 billion), respectively, which, plus the accrued and unpaid interests, represents themaximum potential future payments that we could be required to make under the guarantee. As of December 31, 2016, 2017 and 2018, we had paid a totalamount of RMB14.4 million, RMB441.9 million and RMB810.3 million (US$117.9 million), respectively, to fulfill our guarantee obligations by repayingfinancing partners for defaulted loans, and we recorded RMB7.2 million, RMB252.6 million and RMB553.7 million (US$80.7 million) loan recognized as aresult of payment under the guarantee, respectively, which was the amount we expected to recover from the borrowers. In addition, we launched our loan facilitation service for new cars in the fourth quarter of 2016. As the loan facilitation business for new cars is stillat an early stage of development, we have a limited track record with respect to the credit performance of such loans. The delinquency rate of loans for newcars may be higher than that of used car loans facilitated through our platform. We have taken a more prudent approach in selecting our customers for loansfor new cars. As of December 31, 2018, the total outstanding principal balance of loans for new cars represented 12.4% of the total outstanding principalbalance of auto loans. If we experience a significant increase in delinquency rate on loans extended through our platform, our results of operations, financialcondition and liquidity would be materially and adversely affected. We are not profitable and have negative cash flows from operations, which may continue in the future. We have not been profitable since our inception in 2011. We incurred net losses of RMB1,392.9 million, RMB2,747.8 million and RMB1,538.3million (US$224.1 million) in 2016, 2017 and 2018, respectively. In addition, we had negative cash flow from operating activities of RMB661.2 million,RMB1,834.2 million and RMB2,281.3 million (US$332.4 million) in 2016, 2017 and 2018, respectively. We expect to make significant investmentsincluding in sales and marketing, to further develop and expand our business and these investments may not result in an increase in revenue or positive cashflow on a timely basis, or at all. We may incur substantial losses and negative cash flow in the future for a number of reasons, including decreasing demand or slower than expectedincrease in demand for used cars and our services, increasing competition, weakness in the automotive retail industry in general, as well as other risksdiscussed herein, and we may incur unforeseen expenses, or encounter difficulties, complications and delays in generating revenue or achieving profitability.If our revenues decrease, we may not be able to reduce our costs proportionally in a timely manner because many of our costs are fixed. In addition, if wereduce our costs, we may limit our ability to acquire customers and grow our revenues. Accordingly, we may not be able to achieve profitability and we maycontinue to incur significant losses in the future. 7Table of Contents If we are unable to effectively manage our growth or implement our business strategies, our business, results of operations and financial conditionmay be materially and adversely affected. Our business and prospects depend in part on our ability to effectively manage our growth or implement our growth strategies. As part of ourbusiness strategies, we intend to increase our penetration in existing markets and expand into new geographic markets. Our experience in the markets inwhich we currently operate may not be applicable to other parts of China. We may not be able to leverage our experience to expand into new geographicmarkets in China. As a result, our expansion and monetization strategies, including sales and marketing efforts designed to attract more users and businessesto use our services and thus maximize the conversion of consumers who are only using our transaction services into users of our other services, such as ourloan facilitation services, may not be successful. Furthermore, expanding into new geographical markets will require us to hire additional employees to coverthese markets. We will incur additional compensation and benefit costs, office rental expenses and other costs, as well as experience additional strain on ourmanagerial resources. If we are unable to successfully expand and generate sufficient revenues to cover our increased costs and expenses, our business,financial condition and results of operations may be materially and adversely affected. Moreover, our rapid expansion may lead to new challenges and risks. To manage the further expansion of our business, we need to continuouslyexpand and enhance our infrastructure and technology, and improve our operational and financial systems, procedures and internal controls. We also need totrain, manage and motivate our growing number of employees. In addition, we need to maintain and expand our relationships with our customers, third-partyservice providers and other third parties. We cannot assure you that our personnel, infrastructure, systems, procedures and controls will be adequate to supportour operations. Effectively managing our growth is dependent on a number of other factors, including our ability to: · effectively expand into new geographic markets; · continue to improve our existing services; · launch new services and develop cross-selling opportunities; · stabilize our expenses and enhance our efficiency; · recruit and retain skilled and experienced employees; · strengthen relationships with our business partners; · enhance our risk management and internal control; · charge service fees from customers; · upgrade our technology and continue to innovate; and · maintain and enhance the network effects of our platform. If we fail to effectively manage our growth or implement our business strategies, our business, results of operations and financial condition may bematerially and adversely affected. We rely on a limited number of third-party financing partners to fund loans facilitated through our platform. Inability to maintain sufficient access tofunding would materially and adversely affect our liquidity, business, results of operations and financial condition. Revenues generated from our loan facilitation services accounted for 38.1%, 48.4% and 53.5% of our total revenues in 2016, 2017 and 2018,respectively. As of December 31, 2018, almost all of the funding for consumer auto loans facilitated through our platform was originated by our third-partyfinancing partners. We had four financing partners in 2018, three financing partners in 2017 and two financing partners in 2016. In 2016, 2017 and 2018, ourlargest financing partner provided 95.5%, 51.9% and 56.3% of funding for used car loan facilitated through our 2C business, respectively. In 2016, 2017 and2018, our second largest financing partner provided 4.5%, 26.7% and 42.4% of funding for used car loans facilitated through our 2C business, respectively.Our loan facilitation revenues attributable to our three largest financing partners in 2018 were RMB1,061.5 million (US$154.7 million), RMB672.6 million(US$98.0 million) and RMB15.6 million (US$2.3 million), respectively, or 59.8%,37.9% and 0.9% of our loan facilitation revenues in 2018, and our loanfacilitation revenues attributable to our three financing partners in 2017 were RMB444.8 million (US$64.8 million), RMB281.5 million (US$41.70 million)and RMB218.1 million (US$31.8 million), or 47.1%, 29.8% and 23.1% of our loan facilitation revenues in 2017. See “Item 4. Information on the Company—B. Business Overview—Our Platform and Services—Our 2C Business—Consumer auto loan facilitation services.” 8Table of Contents Because we only rely on a limited number of financing partners and there is no guarantee or commitment on the amount of auto loans our financingpartners will fund through our platform, as the demand for our auto loans increases, there can be no assurance that our current third-party financing partnerscan meet the funding needs of consumer auto loans facilitated through our platform, or we can find additional financing partners, or our cooperation with newfinancing partners will meet our expectations. We have, in the past, terminated our collaboration with certain third-party financing partners and may in thefuture take similar measures. If we terminate our collaboration with the financing partners, we may be unable to find substitutes on commercially reasonableterms, or at all. As a result, we would experience a material adverse effect on our business and results of operations. In addition, some of our financing partnersexperienced liquidity constraints in the past and defaulted on funding the loans facilitated through our platform and there is no assurance similar event willnot occur in the future. Under the arrangement with our financing partners, we prefund the consumer auto loans facilitated through our platform before wereceive the corresponding funding from our financing partners. We record such prefunding to consumers as advance to consumers on behalf of financingpartners. Outstanding advance to consumers on behalf of financing partners amounted to RMB521.9 million (US$76.0 million) as of December 31, 2018 andRMB827.4 million as of December 31, 2017, which was mainly attributable to the auto loans we facilitated for one of our financing partners due to itsliquidity constraints. Furthermore, in the fourth quarter of 2017 and the first quarter of 2018, the same financing partner failed to meet its obligation to timelyfund the auto loans it had already approved through our platform after we had prefunded the loans, which were eventually funded by alternative fundingsources arranged by the financing partner. The aggregate amount of facilitated and prefunded loans that the financing partner failed to fund in the fourthquarter of 2017 and the first quarter of 2018 was RMB300 million and RMB231.0 million (US$33.6 million), respectively. The financing partneracknowledged that it was the legal lender to the borrowers, and was contractually obligated under its cooperation agreement with us to pay this entireamount, because all of these loans were approved by itself and advanced by us on its behalf. To mitigate its breach of agreement with us, the financingpartner found an alternative funding source to fund these auto loans instead to fulfill its legal obligation to fund the loans, even though the financing partner,similar to our other financing partners, was not specifically required to find an alternative funding source under its agreement with us. We have been makingefforts to diversify our funding sources and broaden our collaboration with more financing partners, including non-bank financing institutions. However, ifsimilar incidents occur on a larger scale or more frequently, we cannot assure you that we and/or our financing partners will be able to arrange alternativefunding source in time. In such cases, our capital and liquidity would be strained, which would be materially and adversely affect our business, results ofoperations and financial condition. Our business is dependent upon dealers willing to transact on our platform. A reduction in the number of auto dealers on our platform would have amaterial adverse effect on our business, financial condition and results of operations. Dealers buy and sell a large percentage of the used cars transacted on our platform. Failure to attract and retain a large number of auto dealers to ourplatform, whether because of vehicle supply shortage, competition, or other factors, would adversely affect our business, financial condition and results ofoperations. Although the number of auto dealers on our platform has been increasing, there can be no assurance that this trend will continue. 9Table of Contents Maintaining a large number of auto dealers on our platform depends on a number of factors, including our ability to: · reach a large number of potential buyers of used cars on our platform; · maintain and expand relationships with existing dealers; · develop new business relationships with dealers; · increase or maintain the number of car listings on our platform; · offer services to meet the needs of dealers; and · enhance our service offerings by leveraging our technological capabilities. There is no guarantee that we will be able to maintain and grow the number of auto dealers on our platform, and if we fail to do so, the number ofquality listings and transactions on our platform would decline, and our business, results of operations and financial condition would be materially andadversely affected. We work with third-party service providers. Actions of third-party service providers are outside of our control and could materially and adverselyaffect our business, financial condition and results of operations. We work with third parties in providing many of the services offered on our platform, including delivery and fulfillment, title transfer, car repair, carcollateral repossession and certain data services. We carefully select our third-party service providers, but we are not able to fully control their actions. Ifthese third parties fail to perform as we expect, experience difficulty meeting our requirements or standards, fail to conduct their business ethically, fail toprovide satisfactory services to our customers, receive negative press coverage, violate applicable laws or regulations, breach the agreements with us, or if theagreements we have entered into with the third parties are terminated or not renewed, it could damage our business and reputation. In addition, if such third-party service providers cease operations, temporarily or permanently, face financial distress or other business disruptions, increase their fees, or if ourrelationships with them deteriorate, we would suffer from increased costs, be involved in legal or administrative proceedings with or against our third-partyservice providers and experience delays in providing customers with similar services until we find or develop a suitable alternative. In addition, if we areunsuccessful in identifying high-quality partners, or establishing cost-effective relationships with them, or effectively managing these relationships, ourbusiness and results of operations would be materially and adversely affected. We rely, in part, on our branding and marketing campaigns for customer acquisition and achieving higher levels of brand recognition. If we fail toconduct our sales and marketing activities effectively and efficiently, our business would be harmed. We expect to continue to invest substantial financial and other resources on marketing and advertising to grow our customer base. We currentlyadvertise through a combination of online and offline channels with the goal of driving more visitors to our mobile apps, websites and stores. We also engagebrand ambassadors and launch campaigns to build brand awareness. We face intense competition from our competitors who may have greater marketingresources than we do. In 2016, 2017 and 2018, we spent RMB793.5 million, RMB2,203.1 million and RMB2,687.0 million (US$391.5 million) on sales andmarketing initiatives, respectively. If we fail to conduct our sales and marketing activities effectively and efficiently, or if our marketing campaigns are notsuccessful, our growth, results of operations and financial condition would be materially and adversely affected. Negative coverage related to our business, regardless of its validity, could adversely affect our business, financial position and results of operations. Negative news or media coverage of our business, our employees, our third-party service providers, our brand ambassador, our directors andmanagement or our shareholders, including, without limitation, alleged failure to comply with applicable laws and regulations, alleged fraudulent carlistings, alleged misrepresentation by our sales consultants, breach of data security, failure to protect user privacy, inappropriate business practices, disclosureof inaccurate operating data, negative information on blogs and social media websites, regardless of their validity, could damage our reputation. 10Table of Contents Negative publicity about us or our auto financing partners, such as lack of proper qualification or licenses, inappropriate loan servicing and anyfailure to adequately protect consumers’ information, could harm our reputation. We outsource certain loan servicing functions to third parties, and althoughwe impose contractual obligations on those third parties to comply with relevant law and regulations, we do not have complete control over the methods theyuse to carry out loan servicing. If they use inappropriate methods, including physical force, when collecting debt on our behalf, our reputation may besignificantly damaged. Furthermore, any negative development in the financial services industry, such as bankruptcies or failures of companies providingsimilar services, or negative perception of the industry as a whole, could compromise our image, undermine the trust and credibility we have established andimpose a negative impact on our business and results of operations. If we fail to correct or mitigate misinformation or negative information about us, including information spread through social media or traditionalmedia channels, customer trust in us may be undermined, which would have a material adverse effect on our business, results of operations and financialcondition. Our limited operating history in certain of our services and the rapid evolution of our business model make it difficult for investors to evaluate ourbusiness and prospects. We have limited operating history. Our 2B business began operations in 2011 and our 2C business began operations in 2015. We launched our usedcar auto financing services in 2015 and new car auto financing services in December 2016. We may also launch new financing products from time to time.We have also expanded our offline service network and infrastructure. Our limited operating history in some of our services and the rapid evolution of ourbusiness model mean that our historical growth is not necessarily indicative of our future performance. We cannot assure you that our new service offeringswill achieve the expected results or we will be able to achieve similar results or grow at the same rate as we did in the past. As our business and the used car e-commerce industry in China continue to develop, we may adjust our service offerings or modify our business model. For example, we used to prepayconsumer sellers on behalf of our 2B business buyers. From time to time, we prepaid more than the amount we received from buyers. We recognized revenuefrom this business on a net basis for the periods presented. We have adjusted our service model and payment arrangements with consumer sellers, so we nolonger make upfront payment to them. We historically also provided inspection and other complementary services that enabled consumers to sell used carsthrough our 2B business. Starting in the second half of 2018, we have taken an alternative approach that connects these consumers with quality dealers onour platform without us providing inspection and other services directly. As a result, the GMV for our 2B business decreased by 12.1% from RMB17.4 billionin 2017 to RMB15.3 billion (US$2.2 billion) in 2018. Such adjustment may not achieve expected results and may have a material and adverse impact on ourfinancial condition and results of operations. The fees we charge from transactions on our platform may fluctuate or decline in the future and any material decrease in such service fees would harmour business, financial condition and results of operations. Most of our revenues are derived from the fees we charge from transactions on our platform, including transaction facilitation services and loanfacilitation services in our 2C business, and transaction facilitation services in our 2B business. Maintaining and growing our revenues from transactionfacilitation and loan facilitation service fees depends on a number of factors, including: · our ability to deliver satisfactory used car transaction experience to our customers; · our ability to attract buyers and sellers to our platform; · the average unit price of used cars sold on our platform, which may continue to decrease as we expand our business by entering into lower-tiercity markets; · the average transaction facilitation and loan facilitation service fees that we charge per transaction, which is subject to market competition; · our ability to foster relationships with third-party service providers to provide services through our platform at attractive terms and prices to usand our customers; and · fluctuation in interest rates, which may affect the demand for our loan facilitation services, and other macro-economic changes. 11Table of Contents Any failure to adequately and promptly address any of these risks and uncertainties would materially and adversely affect our business and results ofoperations. For example, as we further expand our business by entering into lower-tier city markets, we have and may continue to experience decreases inaverage transaction facilitation and loan facilitation service fees that we charge per transaction, as the average unit price of used cars sold in those markets istypically lower than that of cars sold in tier-one and tier-two cities. Differences between the estimated residual value of the car collateral and the realizable market prices for the collateral would materially andadversely affect our results of operations. Our auto financing business relies on our ability to estimate the residual value of car collateral to manage credit risk in relation to the guarantee weprovide to financing partners. Differences between the estimated residual value and the realized market price of the car collateral affect the recoverability ofthe defaulted auto loans facilitated through our platform. This in turn affect our credit risk exposure. The volatility in new and used car prices may impact themarket prices and residual value of used cars. See “—Our business is also subject to risks related to China’s used car e-commerce industry, including industry-wide and macroeconomic risks.” Local government restrictions on cross-regional transfer of used cars may affect supply and demand, resulting in variedmarket value of used cars. Our data analytics capabilities may not be able to capture certain other factors that affect the residual value of a car. For example,the ways in which buyers drive or use the cars may vary from buyer to buyer, which could accelerate depreciation of used car values and significantly reducethe residual value of used cars. In the past we experienced incidents where the amount recovered from car collateral was less than our estimated residual valueof the car. If the actual selling price is lower than our forecasted residual value of the car collateral, our business, results of operations and financial conditionmay be materially and adversely affected. If we are unable to repossess the car collateral for delinquent loans facilitated through our platform or do so in a cost-effective manner or if ourability to collect delinquent loans is impaired, our business and results of operations would be materially and adversely affected. We may also besubject to risks relating to third-party debt collection service providers who we engage for the recovery and collection of loans. Under our agreement with third-party financing partners, we guarantee the principal loan amount and the accrued and unpaid interest for all loansfunded by these financing partners and facilitated through our platform. Therefore, failure to collect payment on the loans or to repossess the collateral mayhave a material adverse effect on our business operations and financial positions. Although auto loans facilitated through our platform are secured by thecars, we may not be able to repossess the car collateral when our customers default. Our measures to track the cars include installing GPS trackers on cars. Wecannot assure you that we will be able to successfully locate and recover the car collateral. We have in the past failed to repossess some of the car collateral asthe GPS trackers failed to function properly or had been disabled, and we cannot assure you that these incidences will not happen again the future. We alsocannot assure you that there will not be regulatory changes that prohibit the installation of GPS trackers, or the realized value of the repossessed cars will besufficient to cover our customers’ payment obligations. If we cannot repossess some of these cars or the residual values of the repossessed cars are lower thanwe expected and not sufficient to cover our customers’ payment obligation, our business, results of operations and financial condition may be materially andadversely affected. Moreover, the current regulatory regime for debt collection in the PRC remains unclear. We aim to ensure our collection efforts carried out by ourthird-party service providers comply with the relevant laws and regulations in the PRC, and we have employed contractual measures to further ensure third-party service providers’ compliance with the law. However, we do not have complete control over third-party service providers, and if our collection methodsare viewed by the borrowers or regulatory authorities as harassments, threats or other illegal means, we may be subject to risks relating to third-party debtcollection services providers, including lawsuits initiated by the borrowers or prohibition from using certain collection methods by the regulatory authorities.Any perception that our collection practices are aggressive and not compliant with the relevant laws and regulations in the PRC may result in harm to ourreputation and business, decrease in the willingness of prospective borrowers to apply for and utilize our financing facilitation service, or fines and penaltiesimposed by the relevant regulatory authorities, any of which may have a material adverse effect on our business, financial condition and results of operations. 12Table of Contents Failure to obtain certain filings, approvals, licenses, permits and certificates required for our business operations may materially and adversely affectour business, financial condition and results of operations. Pursuant to relevant laws and regulations, as some of our PRC subsidiaries and VIEs used to provide vehicle maintenance services and were regardedas motor vehicle maintenance operators, these entities were required to obtain license for motor vehicle maintenance operation from the road transportadministration. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Motor Vehicle Maintenance.” As of thedate of this annual report these entities have not obtained all the requisite licenses, but we no longer provide motor vehicle maintenance services. Failure toobtain these licenses may result in enforcement actions, including orders issued by the relevant regulatory authorities requiring us to cease unlawfuloperations and adopt corrective measures including disposal of assets associated with such entities. Moreover, governmental authorities may also imposefines or require us to take other remedial actions and we may even incur criminal liability. Although we do not provide motor vehicle maintenance servicesany more, we cannot assure you that our prior operation will not be regarded by the governmental authorities as historical non-compliance, and imposition ofany enforcement action would adversely affect our reputation and business, financial condition and results of operations. Certain of our PRC subsidiaries and VIEs used to engage in business activities that are not within their registered business scope. As of the date ofthis annual report, we are not aware of any action, claim, or investigation being conducted or threatened by the State Administration for Industry andCommerce (currently known as the State Administration for Market Regulation), or the SAIC or its local branches with respect to such business activities.While we have ceased conducting such business activities, we cannot rule out the possibility that our past practice could be interpreted by the SAIC as“doing business beyond the business scope” and subject us to enforcement actions such as confiscation of any illegal gains, or imposition of fines. In addition, pursuant to relevant laws and regulations, as some of our PRC subsidiaries and VIEs are regarded as operators of used car marketplacesand used car related business, these entities are required to complete filing with the Ministry of Commerce of the PRC, or the MOFCOM, at provincial level.Although we are in the process of preparing the filings, we may not be able to complete such filings in certain locations since the relevant authorities in thoseareas do not accept such filing application in practice due to the lack of local implementation rules and policies in such respects. We plan to submit ourapplication as soon as the relevant governmental authorities are ready to accept our filing application. However, there is no assurance we will be able tocomplete the filing in a timely manner, or at all. Failure to comply with the filing requirements may subject our business to restriction, which would have anadverse impact on our business and results of operations. In addition, it is required by PRC laws and regulations for companies responsible for the construction projects to prepare environmental impactreport, environmental impact statement, or environmental impact registration form based on the different level of potential environmental impact of theprojects. The environmental impact reports (required if potentially serious environmental impact) and the environmental impact statements (required ifpotentially mild environmental impact) are subject to review and approval by the governmental authority and failure to satisfy such requirements maysubject one to discontinuation of the construction projects, fines of 1% to 5% of the total investment in the projects or an order of restoration. Theenvironmental impact registration forms (required if very little environmental impact where environmental impact assessment is not necessary) are required tobe filed with competent authority and failure to satisfy such requirement may subject one to fines up to RMB50,000 (US$7,272). As of the date of this annualreport, one of our PRC subsidiaries has been fined RMB25,000 (US$3,636) for absence of filing of the environmental impact registration form for its low-environmental-impact construction project. We do not regularly conduct construction projects in the ordinary course of our business. However, some of ourprojects, including the building and overall decoration of our transaction centers from time to time, could be recognized as construction projects where atimely filing or submission for approval is required and failure to do so may subject us to fines and other enforcement actions as mentioned above. Considerable uncertainty exists regarding the interpretation and implementation of existing and future laws and regulations governing our businessactivities. Historically, some of our PRC subsidiaries have been fined due to late tax filings, although the amount of the fine was not significant. If we fail tocomplete, obtain, maintain or renew any of the required licenses or approvals or make the necessary filings, we may be subject to various penalties, such asconfiscation of the illegal gains, imposition of fines and discontinuation or restriction of our operations. Any such penalties may disrupt our businessoperations and materially and adversely affect our business, financial condition and results of operations. 13Table of Contents Our financing services may subject us to regulatory and reputational risks, each of which may have a material adverse effect on our business, results ofoperations and financial condition. We provide loan facilitation services to finance consumers’ car purchases, and we also work with financing partners to provide inventory financingto dealers. The percentage of transactions financed by consumer auto loans facilitated by our 2C business was 45.5%, 44.5% and 46.1% of the total numberof used car transactions on our platform in 2016, 2017 and 2018, respectively. PRC laws and regulations concerning financial services, including internetfinancial services, are evolving and the PRC government authorities may promulgate new laws and regulations in the future. We cannot assure you that ourpractices would not be deemed to violate any PRC laws or regulations either now or in the future. For example, the risk assets of a PRC entity that conductsfinance leasing business must not exceed 10 times its total net assets. In addition, PRC regulations stipulate that the amount of auto loans is capped at 80% ofthe purchase price for a self-use conventionally-powered new car, 85% for a self-use new energy vehicle, and 70% for a used car. Our financing partners areresponsible for designing the financing products that we offer through the loan facilitation services on our platform. The financing products of our financialpartners offered our platform may be deemed to exceed the stipulated cap on the loan amount relative to the car purchase price, in which case we may berequired to make adjustments to our cooperation arrangements or cease to cooperate with these financing partners. If we are required to make adjustments toour auto loan facilitation business model or withdraw, discontinue or change some of our auto loan facilitation services, our business, financial condition andresults of operations would be materially and adversely affected. In addition, if the financing products offered on our platform and our cooperation withfinancing partners were to be deemed as in violation of applicable PRC laws or regulations, our reputation would suffer. Moreover, developments in the financial service industry may lead to changes in PRC laws, regulations and policies or in the interpretation andapplication of existing laws, regulations and policies, which may limit or restrict online consumer financing or related facilitation services like those we offer.We may, from time to time, be required to adjust our arrangement with third-party financing partners, which could materially and adversely affect ourbusiness, results of operations, and financial condition. Furthermore, we cannot rule out the possibility that the PRC government will institute a newlicensing regime covering services we provide in the future. If such a licensing regime were introduced, we cannot assure you that we would be able to obtainany newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue ouroperations. We may be deemed to operate financing guarantee business by the PRC regulatory authorities. In August, 2017 the State Council promulgated the Regulations on the Administration of Financing Guarantee Companies, or the FinancingGuarantee Rules which became effective on October 1, 2017. Pursuant to the Financing Guarantee Rules, “financing guarantee” refers to the activities inwhich guarantors provide guarantee to the guaranteed parties as to loans, bonds or other types of debt financing, and “financing guarantee companies” referto companies legally established and operating financing guarantee business. According to the Financing Guarantee Rules, the establishment of financingguarantee companies are subject to the approval by the relevant governmental authority, and unless otherwise stipulated, no entity may operate financingguarantee business without such approval. If any entity violates these regulations and operates financing guarantee business without approval, the entity maybe subject to penalties including ban or suspension of business, fines of RMB500,000 (US$72,722) to RMB1,000,000 (US$145,444), confiscation of illegalgains if any, and criminal liability if the violation constitutes a criminal offense. We do not believe that the Financing Guarantee Rules apply to our used car loan facilitation business as we provide guarantees to our financingpartners in connection with the consumer auto loans and such guarantees are not provided independently as our principal business. However, due to the lackof further interpretations, the exact definition and scope of “operating financing guarantee business” under the Financing Guarantee Rules is unclear. It isuncertain whether we would be deemed to operate financing guarantee business in violation of relevant PRC laws or regulations because of our currentarrangements with certain financial institutions. See “Item 4. Information on the Company—B. Business Overview—Our Platform and Services—Our 2Cbusiness—Consumer auto loans facilitation services.” If the relevant regulatory authorities determine that we are operating financing guarantee business, wemay be required to obtain approval or license for financing guarantee business to continue our collaboration arrangement with certain financial institutions.If we are no longer able to maintain our current arrangement with these financial institutions, or become subject to penalties, our business, financialcondition, results of operations and prospects could be materially and adversely affected. 14Table of Contents If data provided by borrowers and other third-party sources or collected by us are inaccurate, incomplete or fraudulent, the accuracy of our creditassessment could be compromised, customer trust in us could decline, and our business, financial position and results of operations would be harmed. To the extent that loan applicants provide inaccurate or fraudulent information to us, or the data provided by third-party sources is outdated,inaccurate or incomplete, our credit evaluation may not accurately reflect the associated credit risks of borrowers. Among other things, we rely on data fromexternal sources, such as government bureaus, to authenticate each applicant’s identity. These checks may fail and fraud may occur as we may fail to discoveror reveal fake documents or identities used by fraudulent loan applicants. Additionally, once we have obtained a customer’s information, the customer maysubsequently (i) become delinquent in the payment of an outstanding obligation; (ii) default on a pre-existing debt obligation; (iii) take on additional debt;or (iv) experience other adverse financial events, making the information we previously obtained inaccurate. We also collect car collateral location data byinstalling GPS trackers for loan monitoring purposes. The location data we collected may not be accurate. As a result, our ability to repossess the carcollateral could be severely impaired. If we are unable to collect the loans we facilitated or repossess the car collateral due to inaccurate or fraudulentinformation, our results of operations and profitability would be harmed. In addition, the data we include in our car listings is collected and updated by us. The data we collect and use for the car listings may not be accurateor complete due to human error, employee mistake and misconduct. We have received a penalty decision issued by the governmental authority inMarch 2018 and were fined RMB20,000 (US$2,909) for providing inconsistent car information on our platform. Our failure to ensure the accuracy andintegrity of our data, regardless of its source, could lead to a decline in customer trust, impair our ability to evaluate credit risks and adversely affect ourbusiness, financial position and results of operations. We depend on our proprietary technology for critical functions of our business. Failure to properly maintain or promptly upgrade our technology mayresult in disruptions to or lower quality of our services and our business, results of operations and financial condition may be materially and adverselyaffected. We rely on our proprietary technology, including web and mobile portals, car inspection system, AI algorithms and VR technology for criticalfunctions of our businesses. See “Item 4. Information on the Company—B. Business Overview—Technology.” Maintaining and upgrading our technologycarry certain risks, including the risk of disruptions caused by significant design or deployment errors, delays or deficiencies, which has made and maycontinue to make our platform and services unavailable. We may also implement additional or enhanced technology in the future to accommodate ourgrowth and to provide additional capabilities and functionalities. The implementation of new or enhanced technologies may be disruptive to our businessand can be time-consuming and expensive, and may increase management responsibilities and divert management attention. Additionally, our proprietary AIalgorithms are based on data-driven analytics. If we do not have a large amount of data or the quality of data available to us for analysis is unsatisfactory, or ifour algorithms have deficiencies, our proprietary AI algorithms may fail to perform effectively. If we fail to properly maintain or promptly upgrade ourtechnology, our services may be disrupted or become of lower quality or unprofitable, and our results of operations and financial condition may be materiallyand adversely affected. 15Table of Contents Our business is also subject to risks related to China’s used car e-commerce industry, including industry-wide and macroeconomic risks. We operate in China’s used car market. We cannot assure you that this market will continue to grow rapidly in the future. Further, the growth ofChina’s used car industry could be affected by many factors, including: · general economic conditions in China and around the world; · the growth of disposable household income and the availability and cost of credit available to finance used car purchases; · the growth of China’s automobile industry; · the growth of China’s auto financing industry; · taxes and other incentives or disincentives related to used car purchases and ownership; · environmental concerns and measures taken to address these concerns; · the cost of energy, including gasoline prices, and the cost of car license plates in various cities with license plate lottery or auction systems; · the improvement of the highway system and availability of parking facilities; · other government policies relating to used cars and auto financing in China; · fluctuations in the sales and price of new and used cars; · consumer acceptance of used cars and of online purchases of used cars; · consumer acceptance of financing car purchases; · ride sharing, transportation networks, and other fundamental changes in transportation pattern; and · other industry-wide issues, including supply and demand for used cars, age distribution of cars, and supply chain challenges. Any adverse change to these factors could reduce demand for used cars and hence demand for our services, and our results of operations andfinancial condition could be materially and adversely affected. We collect, process, store, share, disclose and use personal information and other data, and any actual or perceived failure to protect such informationand data could damage our reputation and brand and harm our business and results of operations. We collect, process, store, share, disclose and use personal information and other data provided by consumers and our business partners. We alsocollect car collateral location data by installing GPS for loan monitoring purposes. Although we have spent significant resources to protect our user, carcollateral related and transaction data against security breaches, our internal control mechanism may not be sufficient and our security measures may becompromised. Any failure or perceived failure to maintain the security of personal and other data that are provided to or collected by us could harm ourreputation and brand and may expose us to legal proceedings and potential liabilities, any of which could adversely affect our business and results ofoperations. There are numerous laws and regulations regarding privacy and the collection, processing, storing, sharing, disclosing, using and protecting ofpersonal information and other data. Specifically, personally identifiable and other confidential information is increasingly subject to legislation andregulations in numerous domestic and international jurisdictions. The regulatory framework for privacy protection in China and worldwide is currentlyevolving and is likely to remain uncertain for the foreseeable future. We could be adversely affected if legislation or regulations in China are expanded torequire changes in business practices or privacy policies, or if the PRC governmental authorities interpret or implement their legislation or regulations inways that negatively affect our business, financial condition and results of operations. In November 2016, the Standing Committee of the NPC released theInternet Security Law, which took effect in June 2017. The Internet Security Law requires network operators to perform certain functions related to internetsecurity protection and the strengthening of network information management. For instance, under the Internet Security Law, network operators of keyinformation infrastructure generally shall, during their operations in the PRC, store the personal information and important data collected and producedwithin the territory of the PRC. We are in the process of evaluating the potential impacts of the Internet Security Law on our current business practices. Westrive to comply with applicable laws, regulations, policies, and legal obligations relating to privacy and data protection, to the extent possible. However, itis possible that these obligations may be interpreted and applied in new or inconsistent ways and may conflict with other rules or our practices, or that newregulations may be enacted. Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to consumers or otherthird parties or other privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of sensitiveinformation, such as personally identifiable information or other customer data, may result in governmental enforcement actions, litigation or publicstatements against us by consumer advocacy groups or others and could cause consumers and our business partners to lose trust in us, which could have anadverse effect on our business. Additionally, if third parties that we work with violate applicable laws or our policies, such violations may also put ourcustomers’ information at risk and could in turn harm our reputation, business and results of operations. 16Table of Contents In addition to laws, regulations and other applicable rules regarding privacy and privacy advocacy, industry associations or other private partiesmay propose new and different privacy standards. Because the interpretation and application of privacy and data protection laws and privacy standards arestill uncertain, it is possible that these laws or privacy standards may be interpreted and applied in a manner that is inconsistent with our practices. Anyinability to adequately address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and privacystandards, could result in additional cost and liability to us, damage our reputation, inhibit the use of our platform and harm our business. Any breaches to our security measures, including unauthorized access, computer viruses and “hacking” may adversely affect our database and reduceuse of our services and damage our reputation and brand names. The massive data that we have processed and stored makes us or third-party service providers who host our servers a target and potentiallyvulnerable to cyber-attacks, computer viruses, physical or electronic break-ins, or similar disruptions. Breaches to our security measures, including computerviruses and hacking, may result in significant damage to our hardware and software systems and database, disruptions to our business activities, inadvertentdisclosure of confidential or sensitive information, interruptions in access to our platform, and other material adverse effects on our operations, during transferof data or at any time, and result in persons obtaining unauthorized access to our systems and data. Our systems may be subject to infiltration as a result ofthird-party action, employee error, malfeasance or otherwise. While we have taken steps to protect the confidential information that we have access to,techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against atarget, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any accidental or willful security breaches or otherunauthorized access to our platform could cause confidential customer and investor information to be stolen and used for criminal purposes. Securitybreaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming andexpensive litigation and negative publicity. If security measures are breached because of any third-party action, employee error, malfeasance or otherwise, orif design flaws in our technology infrastructure are exposed and exploited, our relationships with customers and investors could be severely damaged, wecould incur significant liability and our business and operations could be adversely affected. We depend heavily on our management team and other key personnel to manage our business. If we fail to retain their services or to attract talents,our ability to run and grow our business could be severely impaired. Our future success is highly dependent on the ongoing efforts of our senior management and key personnel. We rely on our management team fortheir extensive knowledge of and experience in China’s automobiles and internet industries as well as their deep understanding of the Chinese automobilemarket, business environment and regulatory regime. The loss of the services of one or more of our senior executives or key personnel may have a materialadverse effect on our business, financial condition and results of operations. Competition for senior management and key personnel is intense, and the poolof suitable candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel, or attract and retain seniorexecutives or key personnel in the future. If we fail to retain our senior management, our business and results of operations could be materially and adverselyaffected. In addition, if any members of our senior management or any of our key personnel join a competitor or form a competing company, we may not beable to replace them easily and we may lose customers, business partners and key staff members. 17Table of Contents Our business is susceptible to employee misconduct, improper business practices and other fraudulent conduct by or between our employees and thirdparties. We rely on our employees to carry out our operating objectives. We are exposed to many types of operational risks, including the risk of misconductand errors by our employees. Our business depends on our employees to interact with potential customers, conduct inspections of vehicles, process largenumbers of transactions and provide support for other key aspects of our business, all of which involve the use and disclosure of personal information and aresusceptible to human errors and mistakes on the part of our employees. We could be materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal informationwas disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error,purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal informationand interact with customers and other third parties through our marketplace is governed by various PRC laws. Although we provide periodic trainings to all our employees, it is not always possible to identify and deter misconduct or errors by employees, andthe precautions we take to detect and prevent potential misconducts and human errors may not be effective in controlling risks or losses. If any of ouremployees take, convert or misuse funds, documents or data or fail to follow protocol when interacting with customers and among themselves, we could beliable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegalmisappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability. Our employees may alsoengage in improper business practices and other fraudulent conduct with third parties. As a result of these potential damaging activities, we could incursignificant losses, which could have a material adverse effect on our results of operations and financial condition. Failure to adequately protect our intellectual property and proprietary information could materially harm our business and operating results. We believe our patents, trademarks, software copyrights, trade secrets, our brand and other intellectual property rights and proprietary informationare critical to our success. Any unauthorized use of intellectual property rights and proprietary information could harm our business, reputation andcompetitive advantages. We rely on a combination of patent, trademark, trade secret and copyright law, our internal control mechanism, and contractualarrangements to protect our intellectual property. Legal protection may not always be effective. Infringement of intellectual property rights continues to pose a serious risk in doing business inChina. Monitoring and preventing unauthorized use is difficult. Furthermore, the application of laws governing intellectual property rights in China isuncertain and evolving, and could involve substantial risks to us. The practice of intellectual property rights enforcement action by Chinese regulatoryauthorities is in its early stage of development. In the event that we have to resort to litigation and other legal proceedings to enforce our intellectual propertyrights, such action, litigation or other legal proceedings could result in substantial costs and diversion of our management’s attention and resources andcould disrupt our business. There is no assurance that we will be able to enforce our intellectual property rights effectively or otherwise prevent others fromthe unauthorized use of our intellectual property. We try, to the extent possible, to protect our intellectual property, technology, and confidential information by requiring our employees, third-partyservice providers, and consultants to enter into confidentiality and assignment of inventions agreements. Due to potential willful or unintentional conduct ofpersonnel who have access to our confidential and proprietary information, these agreements and control measures may not effectively prevent unauthorizeduse or disclosure of our confidential information, intellectual property, or technology and may not provide an adequate remedy in the event of unauthorizeduse or disclosure of our confidential information, intellectual property, or technology. The enforceability of confidentiality agreements may vary fromjurisdiction to jurisdiction. Failure to obtain or maintain trade secrets and/or confidential know-how protection could adversely affect our competitiveposition. 18Table of Contents Competitors may adopt service names or trademarks similar to ours, thereby harming our ability to build brand identity and possibly leading to userconfusion. Our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection. Ifsuccessful in obtaining such patent protection, our competitors could limit our use of our trade secrets and confidential know-how, and our financial positionand operating results would be adversely affected. We have been and may continue to be subject to intellectual property infringement claims or other allegations by third parties, which may materiallyand adversely affect our business, results of operations and prospects. We depend to a large extent on our ability to develop and maintain the intellectual property rights relating to our technology and online businesses.We have devoted considerable resources to the development and improvement of our car inspection technology, big data and AI capabilities, VRtechnology, mobile applications, mobile sites and websites and information technology systems. We cannot be certain that third parties will not claim thatour business infringes upon or otherwise violates patents, trademarks, copyrights or other intellectual property rights that they hold. Companies operatingonline businesses and provide technology-based services are frequently involved in litigation related to allegations of infringement of intellectual propertyrights. The validity, enforceability and scope of protection of intellectual property rights, particularly in China, are still evolving. We are currently subject toan ongoing trademark claim, and may in the future continue to be subject to intellectual property infringement claims from time to time. As we faceincreasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being thesubject of intellectual property infringement claims. Defending against intellectual property claims is costly and can impose a significant burden on our management and resources, and favorable finaloutcomes may not be obtained in all cases. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, orchanges required to our services to reduce the risk of future liability, may have a material adverse effect on our business, results of operations and prospects. We have been named as a defendant in six putative shareholder class action lawsuits that could have a material adverse impact on our business,financial condition, results of operation, cash flows and reputation. We will have to defend against the putative shareholder class action lawsuits described in “Item 8, Financial Information—A. ConsolidatedStatements and Other Financial Information—Legal Proceedings,” including any appeals of such lawsuits should our initial defense be unsuccessful. We arecurrently unable to estimate the possible outcome or loss or possible range of loss, if any, associated with the resolution of these lawsuits. In the event thatour initial defense of these lawsuits is unsuccessful, there can be no assurance that we will prevail in any appeal. Any adverse outcome of these cases,including any plaintiff’s appeal of a judgment in these lawsuits, could have a material adverse effect on our business, financial condition, results of operation,cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of the defense costs, or any liabilities thatmay arise from these matters. The litigation process may utilize a significant portion of our resources and divert management’s attention from the day-to-dayoperations of our company, all of which could harm our business. We also may be subject to claims for indemnification related to these matters, and wecannot predict the impact that indemnification claims may have on our business or financial results. We may be subject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have amaterial adverse effect on our business, results of operations and financial condition. We may be subject to legal proceedings from time to time in the ordinary course of our business, which could have a material adverse effect on ourbusiness, results of operations and financial condition. Claims arising out of actual or alleged violations of law could be asserted against us by consumers andbusinesses that utilize our services, by competitors, or by governmental entities in civil or criminal investigations and proceedings or by other entities. Theseclaims could be asserted under a variety of laws, including but not limited to consumer finance laws, product liability laws, consumer protection laws,intellectual property laws, unfair competition laws, privacy laws, labor and employment laws, securities laws, real estate laws, tort laws, contract laws,property laws and employee benefit laws. We may also be subject to lawsuits due to actions by our third-party financing partners, or third-party providers ofvarious services, including delivery and fulfillment service, title transfer service, car repair, car inspection equipment, loan servicing, car collateralrepossession, and certain data services. 19Table of Contents For example, we are subject to ongoing trademark, unfair competition and other proceedings in the PRC. These cases are still at preliminary stage,but we believe the claims are without merit and we will defend ourselves accordingly. We are unable, however, to predict the outcome of these cases, orreasonably estimate a range of possible loss, if any, given the current status of the proceedings. We have not recorded any accrual for expected loss paymentswith respect to these cases as of December 31, 2018 and do not believe that any of the intellectual property infringement claims is material to our overallbusiness operations. There is no guarantee that we will be successful in defending ourselves in legal and administrative actions or in asserting our rightsunder various laws. Even if we are successful in our attempt to defend ourselves in legal and administrative actions or to assert our rights under various laws,enforcing our rights against the various parties involved may be expensive, time-consuming and ultimately futile. These actions could expose us to negativepublicity and to substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limitedto suspension or revocation of licenses to conduct business. See “Item 8. Financial Information—A. Consolidated Statements and Other FinancialInformation—Legal Proceedings.” Acquisitions, strategic alliances and investments could be costly, difficult to integrate, disrupt our business and adversely affect our results ofoperations and the value of your investment. As we continue to expand our operations, we have and may in the future enter into strategic alliances or to acquire substantial asset or equities froma pool of candidates that fit our criteria. We are not certain that we will be able to consummate any such transactions in the future or identify those candidatesthat would result in the most successful combinations, or that future acquisitions will be able to be consummated at reasonable prices and terms. In addition,increased competition for acquisition candidates could result in fewer acquisition opportunities for us and higher acquisition prices. Strategic investments oracquisitions will involve risks commonly encountered in business relationships, including: · lack of suitable acquisition candidates; · intense competition with other auction groups or new industry consolidators for suitable acquisitions; · deterioration of our financial capabilities; · difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquiredbusiness; · inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or otherbenefits; · difficulties in retaining, training, motivating and integrating key personnel; · diversion of management’s time and resources from our normal daily operations; · difficulties in successfully incorporating licensed or acquired technology and rights into our platform and service offerings; · difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations; 20Table of Contents · difficulties in retaining relationships with customers, employees and third-party service providers of the acquired business; · risks of entering markets in which we have limited or no prior experience; · regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closingapprovals, as well as being subject to new regulators with oversight over an acquired business; · assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rightsor increase our risk for liability; · failure to successfully further develop the acquired technology or maintain acquired facilities; · liability for activities of the acquired business before the acquisition, including intellectual property infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities; · potential disruptions to our ongoing businesses; and · unexpected costs and unknown risks and liabilities associated with strategic investments or acquisitions. We may not make any investments or acquisitions, or any future investments or acquisitions may not be successful, may not benefit our businessstrategy, may not generate sufficient revenues to offset the associated acquisition costs or may not otherwise result in the intended benefits. In addition, wecannot assure you that any future investment in or acquisition of new businesses or technology will lead to the successful development of new or enhancedservice offerings and that any new or enhanced technology or services, if developed or offered, will achieve market acceptance or prove to be profitable. We may need additional capital to achieve our business targets and respond to market opportunities. If we could not obtain sufficient capital througheither debt or equity, our business, operating results and financial condition could be materially harmed. Since we launched our business, we have raised substantial financing to support the growth of our business. We may require additional capital topursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to improve our brand awareness,build and maintain our offline facilities, develop new products or services or further improve existing products and services, and acquire complementarybusinesses and technologies. In addition, the convertible notes we issued in the total principal amount of US$175 million concurrently with our initial publicoffering will become due and payable in June 2019, and we may require additional capital to repay these debt obligations. However, additional funds maynot be available when we need them on reasonable terms, or at all. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significantdilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Our ability toretain our existing financial resources and obtain additional financing on acceptable terms is subject to a variety of uncertainties, including but not limitedto: · economic, political and other conditions in China; · PRC governmental policies relating to bank loans and other credit facilities; · PRC governmental regulations of foreign investment and the automobile industry in China; · conditions of capital markets in which we may seek to raise funds; and · our future results of operations, financial condition and cash flows. 21Table of Contents If we are unable to obtain adequate financing or financing on satisfactory terms, our ability to continue to pursue our business objectives and torespond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations, financialcondition and prospects could be adversely affected. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financialresults or prevent fraud. Prior to our initial public offering in June 2018, we have been a private company with limited accounting personnel and other resources with whichto address our internal control over financial reporting. In connection with the audits of our consolidated financial statements as of and for the years endedDecember 31, 2016 and 2017, we and our independent registered public accounting firm identified two material weaknesses in our internal control overfinancial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency,or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of theannual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified related to (i) our lack of adequate number of accounting staff and management resources with appropriateknowledge of U.S. GAAP and SEC reporting and compliance requirements and (ii) insufficient documented financial closing policies and procedures,specifically those related to period end expenses cut-off and accruals. We are in the process of implementing a number of measures to remedy these controldeficiencies. See “Item 15. Controls and Procedures—Internal Control Over Financial Reporting.” However, the implementation of these measures may notfully address these deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure tocorrect these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statementsand impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffectiveinternal control over financial reporting could significantly hinder our ability to prevent fraud. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes ofidentifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting. Had we performed a formalassessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internalcontrol over financial reporting, additional deficiencies may have been identified. Since our initial public offering, we have become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404,requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-Fbeginning with our annual report for the fiscal year ending December 31, 2019. In addition, once we cease to be an “emerging growth company” as such termis defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control overfinancial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our managementconcludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its ownindependent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented,designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reportingobligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unableto timely complete our evaluation testing and any required remediation. During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identifyother weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control overfinancial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that wehave effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal controlenvironment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely causeinvestors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, andlead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraudor misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminalsanctions. We may also be required to restate our financial statements for prior periods. 22Table of Contents A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition. Any prolonged slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financialcondition. Economic conditions in China are sensitive to global economic conditions. The global financial markets have experienced significant disruptionssince 2008 and the United States, Europe and other economies have experienced periods of recession. The recovery from the lows of 2008 and 2009 has beenuneven and there are new challenges, including the escalation of the European sovereign debt crisis from 2011, the end of quantitative easing by the U.S.Federal Reserve, the economic slowdown in the Eurozone in 2014 and the expected exit of the United Kingdom from the European Union. The Chineseeconomy has slowed down since 2012 and such slowdown may continue. There is considerable uncertainty over the long-term effects of the expansionarymonetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States andChina. There have also been concerns over events in North Korea, the Middle East and Africa, which have resulted in volatility in financial and othermarkets. There have also been concerns about the economic effect of the tensions in the relationship between China and other countries, including thesurrounding Asian countries. If the Chinese and global economic uncertainties persist, the number of transactions facilitated through our platform maydecrease. Adverse economic conditions could also reduce the number of qualified borrowers seeking auto financing on our platform, as well as their ability torepay the auto loan payments. Should any of these situations occur, the number of customers transacting on our platform, the amount of loans facilitatedthrough our platform and our net revenues would decline, and our business, financial condition and results of operations will be adversely and materiallyaffected. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to pursue orconsummate strategic alliances. See “—We may need additional capital to achieve our business targets and respond to market opportunities. If we could notobtain sufficient capital through either debt or equity, our business, operating results and financial condition could be materially harmed.” The current trade war between the U.S. and China may dampen economic growth in China and adversely affect our business, financial condition andresults of operations. The U.S. government has recently imposed, and has recently proposed additional tariffs on specified products imported from China. In response,China has also imposed and proposing additional tariffs on specified products imported from the U.S. On September 17, 2018, the U.S. announced theimposition of a 10% tariff on US$200 billion of imports from China to the U.S. to be effective September 24, 2018. In January 2019, the 10% tariff wasscheduled to increase to 25%. The U.S. government has agreed to postpone the tariff increase to March 2019 in order to allow time for the U.S. and Chinesegovernments to further negotiate on trade matters. We cannot assure you that the negotiations will result in an agreement between the two countries, or thatthe proposed tariffs will not be imposed even if an agreement will be reached. Although we are not currently subject to any of these tariff measures, the proposed tariffs may adversely affect the economic growth in China and thefinancial condition of our customers. With the potential decrease in the spending powers of our target customers, we cannot guarantee that there will be nonegative impact on our operations. In addition, the current and future actions or escalations by either the U.S. or China that affect trade relations may result inglobal economic turmoil, which may adversely affect our business, financial condition and results of operations. Allegations or lawsuits against us or our management and related negative publicity may harm our reputation and have a material and adverseimpact on our business operations and the trading price of our ADSs. We have been, and may become, subject to allegations or lawsuits brought by our competitors, customers, business partners, short sellers, investmentresearch firms or other individuals or entities. For example, a report was published on April 16, 2019 making various allegations about us, and we respondedpublicly stating the allegations are unfounded. Any such allegation or lawsuit, with or without merit, or any perceived unfair, unethical, fraudulent orinappropriate business practice by us or perceived malfeasance by our management, or failure or perceived failure to comply with legal and regulatoryrequirements, alleged accounting or financial reporting irregularities, could harm our reputation and distract our management from our daily operations.Allegations or lawsuits against us or our management may also generate negative publicity that significantly harms our reputation, which may materially andadversely affect our ability to attract used car buyers and sellers and hence our business operations, and cause the trading price of our ADSs to decline andfluctuate significantly. We may continue to be the target of adverse publicity and detrimental conduct against us, including complaints, anonymous or otherwise, toregulatory agencies regarding our operations, accounting, and regulatory compliance. We may be subject to government or regulatory investigation orinquiries, or shareholder lawsuits, as a result of such third-party conduct and may be required to incur significant time and substantial costs to defendourselves, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time or at all. Ourreputation may also be negatively affected as a result of the public dissemination of allegations or malicious statements about us, which in turn maymaterially and adversely affect the trading price of our ADSs. 23Table of Contents Any failure by us or our third-party service providers to comply with applicable anti-money laundering laws and regulations could damage ourreputation. Our financial partners and payment companies are subject to anti-money laundering obligations under applicable anti-money laundering laws andregulations and are regulated in that respect by the People’s Bank of China, or PBOC. If any of our third-party service provides fail to comply with applicableanti-money laundering laws and regulations, our reputation could suffer and we could become subject to regulatory intervention, which could have amaterial adverse effect on our business, financial condition and results of operations. Any negative perception of the industry, such as that arises from anyfailure of other loan facilitation services providers, consumer finance marketplaces or online transaction platform to detect or prevent money launderingactivities, even if factually incorrect or based on isolated incidents, could compromise our image or undermine the trust and credibility we have established. We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased bothour costs and the risk of non-compliance. We are subject to rules and regulations by various governing bodies, including, for example, the Securities and Exchange Commission, which ischarged with the protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in Chinaand the Cayman Islands, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws andregulations have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time andattention from revenue-generating activities to compliance activities. Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time asnew guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated byongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may besubject to penalty and our business may be harmed. We have limited business, disruption or litigation insurance coverage. The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance productsand are, to our knowledge, not well-developed in the field of business liability insurance. While business disruption insurance is available to a limited extentin China, we have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurance oncommercially reasonable terms make it impractical for us to have such insurance. As a result, except for limited property insurance coverage, we do notmaintain general business liability, disruption or litigation insurance coverage for our operations in China. We consider our insurance coverage to bereasonable in light of the nature of our business, but we cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we willbe able to successfully claim our losses under our current insurance policies on a timely basis, or at all. We have granted, and may continue to grant, options and other types of awards under our share incentive plan, which may result in increased share-based compensation expenses. We adopted an amended and restated share incentive plan in February 2018, which was further amended in August 2018 and November 2018 andwhich we refer to as the 2018 Second Amended and Restated Share Incentive Plan, or the Amended and Restated Plan, in this annual report, for the purpose ofgranting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. Werecognize expenses in our consolidated statement of income in accordance with U.S. GAAP. The maximum aggregate number of ordinary shares which maybe issued pursuant to all awards under the Amended and Restated Plan is 102,040,053 ordinary shares. For example, in 2016, we recorded share-basedcompensation expense of RMB226.4 million for issuance and grant of 19,985,520 ordinary shares to our management in April 2016. In September 2017, oneof our preferred shareholders transferred certain number of preferred shares to Gao Li Group, which is controlled by Mr. Kun Dai, the chairman of our board ofdirectors and chief executive officer. The difference between the transfer price and the fair value of preferred shares transferred was RMB137.7 million andwas recognized as compensation expense to Mr. Kun Dai in September 2017. In May 2018, we granted 17,742,890 restricted shares to Mr. Kun Dai, whichbecame vested immediately upon completion of our initial public offering in June 2018, and we recorded share-based compensation expense of US$93.8million (equivalent to RMB620.4 million) in general and administrative expenses. For the years ended December 31, 2016, 2017 and 2018, we recorded anaggregate of RMB226.4 million, RMB165.9 million and RMB1,052.0 million (US$153.3 million), respectively, in share-based compensation expenses. Asof December 31, 2018, the fair value of vested and nonvested options granted to employees and management amounted to RMB190.2 million (US$27.7million) and RMB164.9 million (US$24.0 million), respectively. We believe the granting of share-based compensation is of significant importance to ourability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future. As a result, ourexpenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. In addition, the issuance ofadditional equity upon the exercise of options or other types of awards would result in further dilution to our shareholders. 24Table of Contents Our business is dependent on the performance of the internet and mobile internet infrastructure and telecommunications networks in China, whichmay not be able to support the demands associated with our growth. Our internet businesses are heavily dependent on the performance and reliability of China’s internet infrastructure, the continual accessibility ofbandwidth and servers to our service providers’ networks, and the continuing performance, reliability and availability of our technology platform. We use theinternet to deliver services to our customers, who access our websites and mobile apps on the internet. We rely on major Chinese telecommunication companies to provide us with bandwidth for our services, and we may not have any access tocomparable alternative networks or services in the event of disruptions, failures or other problems. Internet access may not be available in certain areas due tonational disasters, such as earthquakes, or local government decisions. Surges in internet traffic on our platform, regardless of the cause, may seriously disruptservices we provide through our platform and in-store or cause our technology systems and our platform to shut down. If we experience technical problems indelivering our services over the internet either at national or regional level or system shut downs, we could experience reduced demand for our services, lowerrevenues and increased costs. Consequently, our business, results of operations and financial condition would be adversely affected. We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins,war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures,which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services on ourplatform. Our business could also be adversely affected by the effects of Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, Severe AcuteRespiratory Syndrome, or SARS, or other epidemics. Our business operations could be disrupted if any of our employees is suspected of having Ebola virusdisease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, SARS or other epidemic, since it could require our employees to be quarantined and/or our officesto be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy ingeneral. Our business is subject to quarterly fluctuations and unexpected interruptions. We have experienced, and expect to continue to experience, quarterly fluctuations in our revenues and results of operations. Our revenues trends area reflection of consumers’ car purchase patterns. The holiday period following the Chinese New Year is usually in the first quarter, which may contribute tolower activity levels in that quarter of each year. As a result, our revenues may vary from quarter to quarter and our quarterly results may not be comparable tothe corresponding periods of prior years. Our actual results may differ significantly from our targets or estimated quarterly results. The quarterly fluctuationsin our revenues and results of operations could result in volatility and cause the price of our shares to fall. As our revenues grow, these quarterly fluctuationsmay become more pronounced. Risks Related to Our Corporate Structure If the PRC government finds that the agreements that establish the structure for operating some of our operations in China do not comply with PRCregulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could besubject to penalties or be forced to relinquish our interests in those operations. We are a Cayman Islands exempted company and our PRC subsidiaries are currently considered foreign-invested enterprises. Currently, our mainwebsites are operated and our main business are run by our wholly-foreign-owned enterprises, or WFOEs, while our VIEs hold the title of a number ofintellectual properties, operate certain of our websites and conduct certain of our business. Our WFOEs have entered into a series of contractual arrangementswith our VIEs and their respective shareholders, respectively, which enable us to (i) exercise effective control over our VIEs, (ii) receive substantially all ofthe economic benefits of our VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in our VIEs when and to theextent permitted by PRC law. As a result of these contractual arrangements, we have control over and are the primary beneficiary of our VIEs and henceconsolidate their financial results under U.S. GAAP. See “Item 4. Information on the Company—C. Organizational Structure” for further details. 25Table of Contents In the opinion of JunHe LLP, our PRC legal counsel, (i) the ownership structures of our VIEs in China and our WFOEs that have entered intocontractual arrangements with the VIEs, comply with all existing PRC laws and regulations; and (ii) the contractual arrangements between our WFOEs, theVIEs and their respective shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws orregulations currently in effect. However, our PRC legal counsel has also advised us that there is substantial uncertainty regarding the interpretation andapplication of current and future PRC laws, regulations and rules; accordingly, the PRC regulatory authorities may take a view that is contrary to the opinionof our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted,what they would provide. If we or any of our VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintainany of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violationsor failures, including: · revoking the business licenses and other licenses and permits of our VIEs; · discontinuing or placing restrictions or onerous conditions on our operation through any transactions between our WFOEs and our VIEs; · imposing fines, confiscating the income from our WFOEs or our VIEs, or imposing other requirements with which we or our VIEs may not beable to comply; · requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs andderegistering the equity pledges of our VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exerteffective control over our VIEs; · restricting or prohibiting our use of the proceeds of our initial public offering and the concurrent private placement of convertible notes tofinance our business and operations in China; or · taking other regulatory or enforcement actions that could be harmful to our business. The imposition of any of these penalties would result in adverse effect on our ability to conduct certain part of our business. In addition, it is unclearwhat impact the PRC government actions would have on us and on our ability to consolidate the financial results of our VIEs in our consolidated financialstatements, if the PRC government authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations. Ifthe imposition of any of these government actions causes us to lose our right to direct the activities of our VIEs or our right to receive substantially all theeconomic benefits and residual returns from our VIEs and we are not able to restructure our ownership structure and operations in a satisfactory manner, wewould no longer be able to consolidate the financial results of our VIEs in our consolidated financial statements. Either of these results, or any othersignificant penalties that might be imposed on us in this event, would have an adverse effect on our financial condition and results of operations. 26Table of Contents We have entered into contractual arrangements with our VIEs and their shareholders for a portion of our business operations, which may not be aseffective as direct ownership in providing operational control. We have entered into contractual arrangements with our VIEs and their shareholders to conduct certain aspects of our businesses. These contractualarrangements may not be as effective as direct ownership in providing us with control over our VIEs. For example, our VIEs and their shareholders couldbreach their contractual arrangements with us by, among other things, failing to conduct its operations in an acceptable manner or taking other actions thatare detrimental to our interests. If we had direct ownership of our VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of ourVIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under thecurrent contractual arrangements, we rely on the performance by our VIEs and their respective shareholders of their obligations under the contracts to exercisecontrol over our VIEs. However, the shareholders of our consolidated VIEs may not act in the best interests of our company or may not perform theirobligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through thecontractual arrangements with our VIEs. If any disputes relating to these contracts remain unresolved, we will have to enforce our rights under these contractsthrough the operations of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legalsystem. See “—Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a materialand adverse effect on our business.” Therefore, our contractual arrangements with our VIEs may not be as effective in ensuring our control over the relevantportion of our business operations as direct ownership would be. Our business may be significantly affected by the draft Foreign Investment Law and the newly adopted Foreign Investment Law. In January 2015, MOFCOM published a draft Foreign Investment Law, the 2015 Draft FIL, for soliciting public comments. At the same time,MOFCOM published an accompanying explanatory note of the 2015 Draft FIL, illustrating legislative philosophy and principles of the 2015 Draft FIL. Oneof the core concepts of the 2015 Draft FIL is “de facto control,” which emphasizes substance over form in determining whether an entity is “Chinese” orforeign controlled. This determination requires consideration of the nature of the investors that exercise control over the entity. “Chinese investors” areindividuals who are PRC nationals, PRC government agencies and any domestic enterprise controlled by PRC nationals or government agencies. “Foreigninvestors” are foreign citizens, foreign governments, international organizations and entities controlled by foreign citizens and entities. Under the 2015 DraftFIL, variable interest entities that are controlled via contractual arrangement would also be deemed as foreign-invested enterprises if they are ultimately“controlled” by foreign investors. The 2015 Draft FIL proposes significant changes to the PRC foreign investment legal regime and, when implemented, mayhave a significant impact on businesses in China controlled by foreign invested enterprises primarily through contractual arrangements, such as our business. MOFCOM solicited comments on the 2015 Draft FIL, but no new draft has been published since then. There is substantial uncertainty with respectto the final content, interpretation, adoption timeline and effective date of the 2015 Draft FIL. The draft Foreign Investment Law, if enacted as proposed, maymaterially impact the viability of our current corporate structure, corporate governance and business operations in many aspects. Subsequently, in December 2018, the Standing Committee of the National People’s Congress published a draft Foreign Investment Law and theNational People’s Congress adopted the Foreign Investment Law, or the 2018 FIL on March 15, 2019. The 2018 FIL will come into effect on January 1, 2020.The 2018 FIL does not comment on contractual arrangement with variable interest entity, however, it has a catch-all provision under definition of “foreigninvestment” to include investments made by foreign investors in China through means stipulated by laws or administrative regulations or other methodsprescribed by the State Council. In addition, the concept of “de facto control” and related provisions as proposed in the 2015 Draft FIL are not included inthe 2018 FIL. However, it is not explicit whether the 2018 FIL supersedes the 2015 Draft FIL in its entirety. Both the 2015 Draft FIL and the 2018 FIL grant national treatment to foreign invested entities, except for those foreign invested entities that operatein industries deemed to be either “restricted” or “prohibited” in the “negative list”. Because the “negative list” has yet to be published, it is unclear whether itwill differ from the current Special Entry Management Measures (Negative List) for the Access of Foreign Investment (2018 version). Both the 2015 Draft FILand the 2018 FIL provide that only foreign invested entities operating in foreign restricted or prohibited industries will require entry clearance and otherapprovals that are not required by PRC domestic entities or foreign invested entities operating in other industries. 27Table of Contents Since the 2018 FIL is relatively new, uncertainties exist in relation to its implementation and interpretation and there can be no assurance thatvariable interest entities controlled via contractual arrangements would not be interpreted as foreign investment activities in future practice or legislation.There can be no assurance as to when and whether the 2015 Draft FIL will be officially promulgated, or assurance as to whether our current corporate structurewill be considered “Chinese-controlled” under the scheme of the 2015 Draft FIL. In the event that our variable interest entity contractual arrangements underwhich we operate our business are not treated as a domestic investment and our operations are classified in the “restricted” or “prohibited” industry in the“negative list”, such variable interest entity contractual arrangements may be deemed as invalid and illegal, and we may be required to unwind the variableinterest entity contractual arrangements and/or dispose of such business. Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material andadverse effect on our business. We refer to the shareholders of each of our VIEs as its nominee shareholders because although they remain the holders of equity interests on recordin each of our VIEs, pursuant to the terms of the relevant power of attorney, each such shareholder has irrevocably authorized our WFOEs to exercise his, heror its rights as a shareholder of the relevant VIE. If our VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur additionalcosts and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specificperformance or injunctive relief, and claiming damages, which we cannot assure will be effective under PRC law. For example, if the shareholders of our VIEsrefuse to transfer their equity interest in our VIEs to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or ifthey otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. All of these contractual arrangements are governed by and interpreted in accordance with PRC law, and disputes arising from these contractualarrangements between us and our variable interest entity will be resolved through arbitration in China. These disputes do not include claims arising under theUnited States federal securities law and thus the arbitration provisions do not prevent our shareholders from pursuing claims under the United Sates federalsecurities law. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRClegal system could limit our ability to enforce these contractual arrangements. See “—Risks Related to Doing Business in China—Uncertainties in theinterpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us.” Meanwhile, there are very few precedentsand little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law. There remainsignificant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings byarbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribedtime limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which wouldrequire additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delays or otherobstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our VIEs, and our ability to conductour business may be negatively affected. Contractual arrangements in relation to our VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRCVIEs owe additional taxes, which could negatively affect our financial condition and the value of your investment. Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRCtax authorities. We could face adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into onan arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust theincome of our VIEs in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expensedeductions recorded by our VIEs for PRC tax purposes, which could in turn (i) increase its tax liabilities without reducing our WFOEs’ tax expenses and(ii) limit the ability of our PRC companies to continue to enjoy preferential tax treatment and other financial incentives. In addition, the PRC tax authoritiesmay impose late payment fees and other penalties on our VIEs for the adjusted but unpaid taxes according to the applicable regulations. Although our VIEsgenerate only a limited portion of our total income and incur limited costs and expenses among our PRC companies, our financial position could beadversely affected if our VIEs’ tax liabilities increase or if it is required to pay late payment fees and other penalties. 28Table of Contents In addition, if for any reason we need to cause the transfer of any of the nominee shareholders’ equity interest in any of our VIEs, we might berequired to withhold and pay individual income tax on behalf of the transferring shareholder who is an individual, on any capital gain deemed to have beenrealized by such shareholder on such transfer. The shareholders of our VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business and financialcondition. Conflicts of interest may arise out of the dual roles of the individual who is an officer of our company and a shareholder and director of our VIEs, aswell as the entity who is both an affiliate of a shareholder of our company and shareholder of our VIEs. These shareholders may breach, or cause our VIEs tobreach, or refuse to renew, the existing contractual arrangements we have with them and our VIEs, which would have a material and adverse effect on ourability to effectively control our VIEs and receive economic benefits from them. For example, the shareholders may be able to cause our agreements with ourVIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timelybasis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflictswill be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and ourcompany. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which couldresult in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. We may lose the ability to use and enjoy assets held by our VIEs that are material to the operation of certain portion of our business if the entity goesbankrupt or becomes subject to a dissolution or liquidation proceeding. As part of our contractual arrangements with our VIEs, our VIEs and their subsidiaries hold certain assets including intellectual property, license,permits and premise. If our VIEs go bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable tocontinue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Underthe contractual arrangements, our VIEs may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the businesswithout our prior consent. If our VIEs undergo a voluntary or involuntary liquidation proceeding, the independent third-party creditors may claim rights tosome or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial conditionand results of operations. Risks Related to Doing Business in China Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business andoperations. Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospectsmay be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economiesof most developed countries in many respects, including, but not limited to, the level of government involvement, level of development, growth rate, controlof foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forcesfor economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, asubstantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant rolein regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economicgrowth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferentialtreatment to particular industries or companies. 29Table of Contents While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and amongvarious sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies ofthe Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such changescould also adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. TheChinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures maybenefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adverselyaffected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implementedcertain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity inChina, which may adversely affect our business and operating results. Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us. The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations arerelatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always consistent andenforcement of these laws, regulations and rules involves uncertainties. In particular, PRC laws and regulations concerning the used car e-commerce industry are developing and evolving. Although we have takenmeasures to comply with the laws and regulations that are applicable to our business operations and avoid conducting any activities that may be deemed asillegal under the current applicable laws and regulations, the PRC government authority may promulgate new laws and regulations regulating our industryand amend the existing laws and regulations in the future. See “—Risks Related to Our Business and Industry—Failure to obtain certain filings, approvals,licenses, permits and certificates for our business operations may materially and adversely affect our business, financial condition and results of operations.”We cannot assure you that our practices would not be deemed to violate any PRC laws or regulations. Moreover, developments in the used car serviceindustry and online transaction platform industry may lead to changes in PRC laws, regulations and policies or in the interpretation and application ofexisting laws, regulations and policies that may limit or restrict used car e-commerce marketplaces like ours, which could materially and adversely affect ourbusiness and results of operations. In addition, our PRC subsidiaries are subject to laws and regulations applicable to foreign investment in China. Any changes in PRC laws andregulations related to foreign investment in China could affect the business environment and our ability to operate our business in China. For example,MOFCOM published a discussion draft of the proposed Foreign Investment Law on January 19, 2015, aiming to, upon its enactment, replace the trio ofexisting laws regulating foreign investment in China, together with their implementation rules and ancillary regulations. Among other things, the draftForeign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company isconsidered a foreign-invested enterprise. “Control” is broadly defined in the draft Foreign Investment Law to cover the following summarized categories:(i) holding directly or indirectly 50% or more of the equity interest, assets, voting rights, or similar equity interest of the subject entity; (ii) holding directly orindirectly less than 50% of the equity interest, assets, voting rights or similar equity interest of the subject entity, but having the power to secure at least 50%of the seats on the board of directors or other equivalent decision-making bodies, or having the voting power to exert material influence over the board ofdirectors, at the shareholders’ meeting or over other equivalent decision-making bodies; or (iii) having the power to exert decisive influence, via contractualor trust arrangements, over the subject entity’s operations, financial, staffing and technology matters, or other key aspects of business operations. The draftForeign Investment Law specifically provides that entities established in China, but ultimately “controlled” by foreign investors, will be treated as foreign-invested enterprises. If a foreign-invested enterprise proposes to conduct business in an industry subject to foreign investment restrictions, the foreign-invested enterprise must go through market entry clearance by MOFCOM before being established. According to the draft Foreign Investment Law, variableinterest entities would also be deemed as foreign-invested enterprises if they are ultimately “controlled” by foreign investors, and accordingly would besubject to restrictions on foreign investments. However, the draft Foreign Investment Law does not address what actions will be taken with respect to theexisting companies with a VIE structure. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investmentregulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign anddomestic investments. Substantial uncertainty exists with respect to its enactment timetable, interpretation and implementation. The draft Foreign InvestmentLaw, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in manyaspects. 30Table of Contents From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative andcourt authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate theoutcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRClegal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may haveretroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially andadversely affect our business and impede our ability to continue our operations. Our business is susceptible to changes in government policies, including policies on automobile purchases, ownership, taxation, vehicle title transfer,and used car transactions across regions and provinces. Failure to adequately respond to such changes could adversely affect our business. Government policies on automobile purchases and ownership may have a material impact on our business due to their influence on consumerbehaviors. Since 2009, the PRC government has changed the vehicle purchase tax on automobiles with 1.6 liter or smaller engines several times. In addition,in August 2014, several PRC governmental authorities jointly announced that from September 2014 to December 2017, purchases of new energyautomobiles designated on certain catalogs will be exempted from vehicle purchase taxes. In April 2015, several PRC governmental authorities also jointlyannounced that from 2016 to 2020, purchasers of new energy automobiles designated on certain catalogs will enjoy subsidies. In December 2016, relevantPRC governmental authorities further adjusted the subsidy policy for new energy automobiles. We cannot predict whether government subsidies will remainin the future or whether similar incentives will be introduced, and if they are, their impact on automobile retail transactions in China. It is possible thatautomobile retail transactions may decline significantly upon expiration of the existing government subsidies if consumers have become used to suchincentives and postpone purchase decisions in the absence of new incentives. If automobile retail transactions indeed decline, our revenues and results ofoperations may be materially and adversely affected. Some local governmental authorities issued regulations and implementation rules in order to control urban traffic and the number of automobileswithin particular urban areas. For example, Beijing municipal authorities adopted regulations and implementing rules in December 2010 to limit the totalnumber of license plates issued to new automobile purchases in Beijing each year. Guangzhou municipal authorities also announced similar regulations,which came into effect in July 2013. There are similar policies that restrict the issuance of new automobile license plates in Shanghai, Tianjin, Hangzhou,Guiyang and Shenzhen. In September 2013, the State Council released a plan for the prevention and remediation of air pollution, which requires large cities,such as Beijing, Shanghai and Guangzhou, to further restrict the number of motor vehicles. In October 2013, the Beijing government issued an additionalregulation to limit the total number of vehicles in Beijing to no more than six million by the end of 2017. In addition to the quantity control of automobiles,some local governmental authorities have also adopted environmental protection policies and regulations in recent years, pursuant to which an automobile,failing to meet certain environmental protection requirements or standards, will not be able to obtain the license plate issued by relevant local governmentalauthorities. 31Table of Contents As some used cars cannot meet the environmental protection standards required in some regions, the above policies and regulations may restrict oradversely impact the cross-region transactions of such used cars. Such regulatory developments, as well as other uncertainties, may adversely affect thegrowth prospects of China’s automobile industry, which in turn may have a material adverse impact on our business. You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or ourmanagement named in the annual report based on foreign laws. We are a company incorporated under the laws of the Cayman Islands, we conduct substantially all of our operations in China and substantially allof our assets are located in China. In addition, all our senior executive officers reside within China for a significant portion of the time and most are PRCresidents. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you toenforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officersand directors, none of whom currently reside in the United States and whose assets are located outside the United States. In addition, there is uncertainty as towhether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon thecivil liability provisions of the securities laws of the United States or any state. The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforceforeign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where thejudgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the United Statesthat provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courtswill not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws ornational sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by acourt in the United States. The laws and regulations governing the online consumer finance industry in China are evolving rapidly. If any of our business practices is deemed toviolate any PRC laws or regulations, or if our arrangements with financing partners are adjusted, we may have to change our business model, and ourbusiness, financial condition and results of operations would be materially and adversely affected. Our financing partners provide most of the funding for the consumer auto loans facilitated through our platform, while we provide loan facilitationservices to both consumers and our financing partners. We guarantee full repayments of all consumer auto loans facilitated through our platform to third-party financing partners and post security deposits to the financing partners. Depending on our specific arrangements with each financing partner, once a loanis in default, we may be obligated to pay the financing partner any outstanding payments and penalty fees, or pay the financing partner out of our own fundsfor the remaining loan balance and any other payments due to the financing partner. We charge consumers loan facilitation fees for our loan facilitationservices. The Office of the Leading Group for Specific Rectification against Online Finance Risks and the Office of the Leading Group for SpecificRectification against P2P Online Lending Risks jointly issued the Circular on Regulating and Rectifying Cash Loan Business, or Circular 141, inDecember 2017 to regulate “cash loans” related business. The Circular 141 specifies the features of “cash loans” as follows: loans are extended withoutrelying on any consumption scenario in connection with sales of goods; the terms of the loans do not specify the use of loan proceeds; there is noqualification requirement on the part of customers; and the loans are unsecured. Given that the consumer auto loans facilitated through our platform are basedon real consumption scenarios with specified use and the majority of the loans are secured with the car collateral, we believe they should not be deemed as“cash loans” under Circular 141, and thus our loan facilitation services through our platform are not subject to the regulation of Circular 141. 32Table of Contents However, as the Circular 141 has been issued very recently and the laws and regulations governing the online consumer finance industry in Chinaare evolving rapidly, there are substantial uncertainties regarding the interpretation and application of the regulations. Accordingly we cannot rule out thepossibility that the PRC regulatory authorities may take a view that is contrary to ours and view the consumer auto loans facilitated through our platform as“cash loans” and the guarantees for the consumer auto loans as credit enhancement service. The Circular 141 prohibits a financial institution participating inthe “cash loan” business from accepting credit enhancement services from a third party which has not obtained any license or approval to provide guarantees,including credit enhancement service in the form of a commitment to assume default risks, and requires a financial institution to ensure its service providersin “cash loan” business will not charge any interest or fees from borrowers. Therefore, in the event that the consumer auto loans facilitated through our platform are deemed as “cash loans” under the Circular 141, we may berequired to obtain qualification to provide guarantee to third-party financing partners for the consumer auto loans facilitated by us, and our financingpartners may choose to terminate or modify their contractual or business arrangements with us. Moreover, developments in the PRC online consumer financeindustry may lead to further changes in relevant PRC laws, regulations and policies, which may adversely affect our loan facilitation business. If the relevantregulatory authorities determine that the Circular 141 is applicable to the auto finance industry and our business is deemed to be in violation of Circular 141,or if our arrangements with financing partners are adjusted, we may have to significantly change our business model, which would materially and adverselyaffect our results of operations and financial condition. Regulation and censorship of information disseminated over the internet in China may adversely affect our business, and we may be liable forinformation displayed on, retrieved from or linked to our websites and mobile apps. China has enacted laws and regulations governing internet access and the distribution of information through the internet. The PRC governmentprohibits information that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, containsterrorism or extremism content, or is reactionary, obscene, superstitious, fraudulent or defamatory, from being distributed through the internet. PRC laws alsoprohibit the use of the internet in ways which, among other things, result in a leakage of state secrets or the distribution of socially destabilizing content.Failure to comply with these laws and regulations may result in sanctions or penalties such as revocation of licenses to provide internet content and otherlicenses, the shut-down of the concerned websites or mobile apps, and reputational harm. A website or mobile apps operator may also be held liable forcensored information displayed on or linked to its website or mobile apps. We may be subject to potential liability for certain unlawful actions of users of ourplatform or for content we distribute that is deemed inappropriate. We may be required to delete content that violates PRC laws and report content that wesuspect may violate PRC laws, which may reduce our consumer base. It may be difficult to determine the type of content that may result in liability for us,and if we are found to be liable, we may be prevented from operating our business or offering other services in China. PRC regulations relating to offshore investment activities by PRC residents and enterprises may increase our administrative burden and restrict ouroverseas and cross-border investment activities. If our PRC resident and enterprise shareholders fail to make any applications and filings requiredunder these regulations, we may be unable to distribute profits to such shareholders and may become subject to liability under PRC law. In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ OffshoreInvestment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the previous SAFE Circular 75,which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRCcorporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 isapplicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future. Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments inoffshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who is adirect or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that SPV, to reflect any materialchange. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch ofSAFE to reflect any material change. If any PRC resident shareholder of such SPV fails to make the required registration or update the registration, thesubsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to theSPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiaries in China. In February 2015, SAFE promulgated aNotice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice 13,applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under SAFECircular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and accept registrations under thesupervision of SAFE. 33Table of Contents In August 2014, MOFCOM promulgated the Measures for the Administration of Overseas Investment, and the National Development ReformCommittee, or the NDRC, promulgated the Administrative Measures for the Approval and Filing of Overseas Investment Projects. In December 2017, theNDRC further promulgated the Administrative Measures of Overseas Investment of Enterprises, which became effective in March 2018. Pursuant to theseregulations, any outbound investment of PRC enterprises in the area and industry that is not sensitive is required to be filed with MOFCOM and the NDRC ortheir local branch. Mr. Kun Dai, who indirectly holds our shares through SPVs and who is known to us as a PRC resident, has completed the applicable foreignexchange registrations to the extent acceptable by SAFE in accordance with SAFE Circular 75 and SAFE Circular 37. We cannot assure you, however, thatMr. Kun Dai will continue to make required filings or updates in a timely manner, or at all. Moreover, we can provide no assurance that we are or will in thefuture continue to be informed of the identities of all PRC residents and PRC enterprises holding direct or indirect interest in our company, and even if we areaware of such shareholders or beneficial owners who are PRC residents or PRC enterprises, we may not be able to compel them to comply with SAFE Circular37 and outbound investment related regulations, and we may not even have any means to know whether they comply with these requirements. Any failure orinability by such individuals or enterprises to comply with SAFE and outbound investment related regulations may subject such individuals or theresponsible officers of such enterprises to fines or legal sanctions, and may result in adverse impact on us, such as restrictions on our ability to distribute orpay dividends. Furthermore, as these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementationhave been constantly evolving, it is uncertain how these regulations, and any future regulations concerning offshore or cross-border investments andtransactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringentreview and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings,which may adversely affect our financial condition and results of operations. Due to the complexity and constantly changing nature of the foreign exchangeand outbound investment related regulations as well as the uncertainties involved, we cannot assure you that we have complied or will be able to complywith all applicable foreign exchange and outbound investment related regulations. In addition, if we decide to acquire a PRC domestic company, we cannotassure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings andregistrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect ourbusiness and prospects. Governmental control of currency conversion may affect the value of your investment. The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currencyout of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding companyprimarily relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreignexchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchangetransactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under theexisting exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to paydividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be convertedinto foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, weneed to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries and VIEs to pay off their respective debt in a currency otherthan Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRCgovernment may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control systemprevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies toour shareholders, including holders of our ADSs. 34Table of Contents Fluctuations in exchange rates of the Renminbi could materially affect our reported results of operations. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political andeconomic conditions in China and by China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of peggingthe value of the Renminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. BetweenJuly 2008 and June 2010, this appreciation halted and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. SinceJune 2010, the Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. On November 30, 2015, the Executive Board of theInternational Monetary Fund (IMF) completed the regular five-year review of the basket of currencies that make up the Special Drawing Right, or the SDR,and decided that with effect from October 1, 2016, Renminbi is determined to be a freely usable currency and will be included in the SDR basket as a fifthcurrency, along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the Renminbi has depreciatedsignificantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market andprogress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to theexchange rate system, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future.It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in thefuture. Significant revaluation of the Renminbi may have a material and adverse effect on your investment. To the extent that we need to convert U.S.dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount wewould receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends onour Class A ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on theU.S. dollar amount available to us. Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. As of the date of this annual report, wehave not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter intohedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge ourexposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convertRenminbi into foreign currency or to convert foreign currency into Renminbi. PRC rules on mergers and acquisitions may make it more difficult for us to pursue growth through acquisitions. The Anti-Monopoly Law, or the AML, promulgated by the Standing Committee of the National People’s Congress, which became effective in 2008,requires that when a concentration of undertakings occurs and reaches statutory thresholds, the undertakings concerned shall file a prior notification withMOFCOM. Without the clearance from MOFCOM, no concentration of undertakings shall be implemented and effected. Mergers, acquisitions or contractualarrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance toMOFCOM when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in2008, is triggered. If such prior notification is not obtained, MOFCOM may order the concentration to cease its operations, dispose of shares or assets, transferthe business of the concentration within a time limit, take any other necessary measures to restore the situation as it was before the concentration, and mayimpose administrative fines. 35Table of Contents Also, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatoryagencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreigninvestors more time-consuming and complex. Such regulation requires, among other things, that MOFCOM be notified in advance of any change-of-controltransaction in which a foreign investor acquires control of a PRC domestic enterprise, if (i) it is concerned with certain industries, (ii) such transactioninvolves factors that have an impact on the national economic security, or (iii) such transaction may lead to a change in control of a domestic enterprise thatholds a famous trademark or PRC time-honored brand. The approval from MOFCOM shall be obtained in circumstances where overseas companiesestablished or controlled by PRC enterprises or residents acquire affiliated domestic companies. In addition, PRC national security review rules, i.e. Provisions of Ministry of Commerce on Implementation of Security Review System for Mergersand Acquisitions of Domestic Enterprises by Foreign Investors, which became effective in September 2011 and Notice of the General Office of State Councilon Establishment of Security Review System Pertaining to Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which became effective inMarch 2011, require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to nationalsecurity be subject to security review before consummation of any such acquisition. We believe that our business is not in an industry related to nationalsecurity. However, we cannot preclude the possibility that MOFCOM or other government agencies may publish interpretations contrary to ourunderstanding or broaden the scope of the security review in the future. Moreover, the Administrative Measures for Enterprises’ Overseas Investment, or the Overseas Investment Rules, adopted by the NDRC onDecember 26, 2017 and will become effective on March 1, 2018, stipulates that for local enterprises (enterprises that are not managed by the stategovernment), if the amount of investment made by the Chinese investors is less than US$300 million and the target project is non-sensitive, then the overseasinvestment project will require filing, instead of approval, with the local branch of the CSRC where the enterprise itself is registered. Although the NDRC hasderegulated on overseas investment to certain extent, we are still subject to the procedures required by the NDRC before any of our PRC subsidiaries canconduct any overseas investment activities. See “Item 4. Information on the Company—B. Business Overview—Regulation—M&A Rules and OverseasListings.” PRC regulations on loans and direct investments by offshore holding companies to PRC entities may delay or prevent us from making loans oradditional capital contributions to our PRC entities. As an offshore holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries and our VIEs, or we may make additionalcapital contributions to our PRC subsidiaries. Such loans to our PRC subsidiaries or our VIEs in China and capital contributions are subject to PRCregulations and approvals. For example, loans by us to our PRC subsidiaries cannot exceed statutory limits and must be registered with SAFE or its localbranch. Besides SAFE registration, loans to our VIEs may also need to be filed with the NDRC or its local branches. Capital contributions to our PRCsubsidiaries must be approved by or filed with the PRC Ministry of Commerce or its local counterpart. In addition, the PRC government also restricts theconvertibility of foreign currencies into Renminbi and use of the proceeds. On March 30, 2015, SAFE promulgated Circular 19, which took effect andreplaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated Circular 16, effective on June 9, 2016, which, among other things,amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted fromforeign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyondits business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of the applicablecirculars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. If our variableinterest entity requires financial support from us or our wholly owned subsidiaries in the future and we find it necessary to use foreign currency-denominatedcapital to provide such financial support, our ability to fund our variable interest entity’s operations will be subject to statutory limits and restrictions,including those described above. The applicable foreign exchange circulars and rules may significantly limit our ability to convert, transfer and use the net proceeds from our initialpublic offering and the concurrent private placement of convertible notes or any offering of additional equity securities in China, which may adversely affectour business, financial condition and results of operations. As the foreign exchange related regulatory regime and practice are complex and still evolving andinvolve many uncertainties, we cannot assure you that we have complied or will be able to comply with all applicable foreign exchange circulars and rules,or that we will be able to complete the necessary government registrations or filings on a timely basis, if at all, with respect to future loans by us to our PRCsubsidiaries or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or filings, our ability tocontribute additional capital to fund our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and ourability to fund and expand our business. 36Table of Contents Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability. China’s overall economy and the average wage in China have increased in recent years and are expected to continue to grow. The average wagelevel for our employees has also increased in recent years. We expect that our labor costs, including wages and employee benefits, will continue to increase.Unless we are able to pass on these increased labor costs to those who pay for our services, our profitability and results of operations may be materially andadversely affected. In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees and paying variousstatutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternityinsurance to designated government agencies for the benefit of our employees. Pursuant to the PRC Labor Contract Law and its implementation rules,employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’probation and unilaterally terminating labor contracts. In the event that we decide to terminate some of our employees or otherwise change our employmentor labor practices, the PRC Labor Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effectivemanner, which could adversely affect our business and results of operations. In October 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law, effective July 1, 2011. OnApril 3, 1999, the State Council promulgated the Regulations on the Administration of Housing Funds, which was amended on March 24, 2002. Companiesregistered and operating in China are required under the Social Insurance Law and the Regulations on the Administration of Housing Funds to, apply forsocial insurance registration and housing fund deposit registration within 30 days of their establishment and, to pay for their employees different socialinsurance including pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to the extentrequired by law. However, certain of our PRC subsidiaries and VIEs that do not hire any employees and are not a party to any employment agreement, havenot applied for and obtained such registration, and instead of paying the social insurance payment on their own for their employees, certain of our PRCsubsidiaries and VIEs use third-party agencies to pay in the name of such agency. We could be subject to orders by the competent labor authorities forrectification and failure to comply with the orders may further subject us to administrative fines. As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our employmentpractices do not and will not violate labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. Wecannot assure you that we have complied or will be able to comply with all labor-related law and regulations regarding including those relating toobligations to make social insurance payments and contribute to the housing provident funds. If we are deemed to have violated relevant labor laws andregulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations willbe adversely affected. Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans maysubject the PRC plan participants or us to fines and other legal or administrative sanctions. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participatingin Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listedcompany, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of suchoverseas-listed company, and complete certain other procedures. 37Table of Contents In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and thepurchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuousperiod of not less than one year and who have been granted options are subject to these regulations when our company. Failure to complete SAFEregistrations may subject them to fines of up to RMB300,000 (US$43,634) for entities and up to RMB50,000 (US$7,272) for individuals, and legal sanctionsand may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us.We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employeesunder PRC law. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Stock Incentive Plans.” Dividends we receive from our subsidiaries located in the PRC may be subject to PRC withholding tax, which could materially and adversely affect theamount of dividends, if any, we may pay our shareholders. The PRC Enterprise Income Tax Law, or the EIT Law, classifies enterprises as resident enterprises and non-resident enterprises. The EIT Lawprovides that an income tax rate of 20% may be applicable to dividends payable to non-resident investors, which (i) do not have an establishment or place ofbusiness in the PRC or (ii) have an establishment or place of business in the PRC but the relevant income is not effectively connected with the establishmentor place of business, to the extent such dividends are derived from sources within the PRC. The State Council of the PRC reduced such rate to 10% throughthe implementation regulations of the EIT Law. Further, pursuant to the Double Tax Avoidance Arrangement between Hong Kong and Mainland China andthe Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in February 2009 by the State Administration ofTaxation (“SAT”), if a Hong Kong resident enterprise owns more than 25% of the equity interest in a company in China at all times during the 12-monthperiod immediately prior to obtaining a dividend from such company, the 10% withholding tax on dividends is reduced to 5% provided certain otherconditions and requirements under the Double Tax Avoidance Arrangement between Hong Kong and Mainland China and other applicable PRC laws aresatisfied at the discretion of relevant PRC tax authority. We are a Cayman Islands holding company and we have 3 Cayman Islands subsidiaries, 3 British Virgin Islands subsidiaries, and 6 Hong Kongsubsidiaries which in turn hold controlling equity interest of 34 PRC subsidiaries. If we and our Cayman and Hong Kong subsidiaries are considered as non-resident enterprises and each of our Hong Kong subsidiaries is considered as a Hong Kong resident enterprise under the Double Tax Avoidance Arrangementand is determined by the competent PRC tax authority to have satisfied relevant conditions and requirements, then the dividends paid to our Hong Kongsubsidiaries by its PRC subsidiaries may be subject to the reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. However, based onthe Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, if the relevant PRC tax authorities determine, in theirdiscretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authoritiesmay adjust the preferential tax treatment; and based on the Notice on the Comprehension and Recognition of Beneficial Owner in Tax Treaties issued inOctober 2009 by the SAT, conduit companies, which are established for the purpose of evading or reducing tax, transferring or accumulating profits, shall notbe recognized as beneficial owner and thus are not entitled to the abovementioned reduced income tax rate of 5% under the Double Tax AvoidanceArrangement. If we are required under the EIT Law to pay income tax for any dividends we receive from our subsidiaries in China, or if any of our Hong Kongsubsidiaries is determined by PRC government authority as receiving benefits from reduced income tax rate due to a structure or arrangement that is primarilytax-driven, it would materially and adversely affect the amount of dividends, if any, we may pay to our shareholders. 38Table of Contents Under the EIT Law, we may be classified as a “resident enterprise” of China; such classification could result in unfavorable tax consequences to usand our non-PRC shareholders and materially and adversely affect our results of operations and financial condition. Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto managementbody” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. Theimplementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over thebusiness, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued a circular, known asSAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that isincorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de factomanagement body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshoreincorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de factomanagement body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) theprimary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters aremade or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals,and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habituallyreside in the PRC. We believe that Uxin Limited is not a PRC resident enterprise for PRC tax purposes. See “Item 4. Information on the Company—B. BusinessOverview—Regulation—Regulations Relating to Tax—Enterprise Income Tax.” However, the tax resident status of an enterprise is subject to determinationby the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authoritiesdetermine that Uxin Limited is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% tax from dividends wepay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including ourADS holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income istreated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders(including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20%which in the case of dividends may be withheld at source. Any PRC tax liability may be reduced by an applicable tax treaty. However, it is unclear whethernon-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the eventthat we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or ordinary shares. In addition to the uncertainty as to the application of the “resident enterprise” classification, we cannot assure you that the PRC Government willnot amend or revise the taxation laws, rules, and regulations to impose stricter tax requirements, higher tax rates, or retroactively apply the EIT Law. If suchchanges occur or if such changes are applied retroactively, such changes could materially and adversely affect our results of operations and financialconditions. We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC shareholders. In February 2015, the SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-TaxResident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 extends its tax jurisdiction to transactions involving transfer of other taxable assetsthrough offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides clear criteria for assessment of reasonablecommercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market.SAT Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets.In October 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-residentEnterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The Bulletin 37 further clarifies the practice andprocedure of the withholding of nonresident enterprise income tax. Where a non-resident enterprise transfers taxable assets indirectly by disposing of theequity interests of an overseas holding company, which is an indirect transfer, the non-resident enterprise as either transferor or transferee, or the PRC entitythat directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC taxauthority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose ofreducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer other than transfer of Shares of ADSs acquired and sold onpublic markets may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated towithhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transfereemay be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. 39Table of Contents We face uncertainties as to the reporting and other implications of certain past and future transactions that involve PRC taxable assets, such asoffshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if ourcompany is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT PublicNotice 7 or Bulletin 37, or both. We have not filed certain filings under SAT Notice 7 filings for some of our historical share transfers and restructurings. Fortransfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SATPublic Notice 7 and Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Public Notice 7 and Bulletin 37, or torequest the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxedunder these circulars, which may have a material adverse effect on our financial condition and results of operations. The audit report included in this annual report is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Boardand, as such, you are deprived of the benefits of such inspection. Our auditor, the independent registered public accounting firm that issued the audit reports included elsewhere in this annual report, as an auditor ofcompanies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), orPCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the laws of theUnited States and applicable professional standards. Our auditor is located in, and organized under the laws of, the PRC, which is a jurisdiction where thePCAOB has been unable to conduct inspections without the approval of the Chinese authorities. In May 2013, PCAOB announced that it had entered into aMemorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes a cooperative frameworkbetween the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the CSRC or the PRC Ministry ofFinance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the China Securities Regulatory Commission, or CSRC,and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that tradeon U.S. exchanges. On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in theiroversight of financial statement audits of U.S.-listed companies with significant operations in China. However, it remains unclear what further actions, if any,the SEC and PCAOB will take to address the problem. This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independentregistered public accounting firm. As a result, we and investors in our ordinary shares are deprived of the benefits of such PCAOB inspections. The inabilityof the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered publicaccounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections, whichcould cause investors and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of ourfinancial statements. 40Table of Contents Proceedings instituted by the SEC against Chinese affiliates of the “big four” accounting firms, including our independent registered publicaccounting firm, could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act. Starting in 2011 the Chinese affiliates of the “big four” accounting firms, including our independent registered public accounting firm, were affectedby a conflict between U.S. and Chinese law. Specifically, for certain U.S.-listed companies operating and audited in mainland China, the SEC and the PCAOBsought to obtain from the Chinese firms access to their audit work papers and related documents. The firms were, however, advised and directed that underChinese law, they could not respond directly to the U.S. regulators on those requests, and that requests by foreign regulators for access to such papers inChina had to be channeled through the CSRC. In late 2012, this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules of Practice and also under theSarbanes-Oxley Act of 2002 against the PRC accounting firms, including our independent registered public accounting firm. A first instance trial of theproceedings in July 2013 in the SEC’s internal administrative court resulted in an adverse judgment against the firms. The administrative law judge proposedpenalties on the firms including a temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pendingreview by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firms reached a settlement with theSEC. Under the settlement, the SEC accepted that future requests by the SEC for the production of documents will normally be made to the CSRC. The firmswere to receive matching Section 106 requests, and are required to abide by a detailed set of procedures with respect to such requests, which in substancerequire them to facilitate production via the CSRC. If they failed to meet specified criteria, during a period of four years starting from the settlement date, theSEC retained authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. Under the terms of thesettlement, the underlying proceeding against the four China-based accounting firms was deemed dismissed with prejudice four years after entry of thesettlement. The four-year mark occurred on February 6, 2019. While we cannot predict if the SEC will further challenge the four China-based accountingfirms’ compliance with U.S. law in connection with U.S. regulatory requests for audit work papers or if the results of such a challenge would result in the SECimposing penalties such as suspensions. If additional remedial measures are imposed on the Chinese affiliates of the “big four” accounting firms, includingour independent registered public accounting firm, we could be unable to timely file future financial statements in compliance with the requirements of theExchange Act. In the event the Chinese affiliates of the “big four” become subject to additional legal challenges by the SEC or PCAOB, depending upon the finaloutcome, listed companies in the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operationsin the PRC, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, includingpossible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our common stock may be adversely affected. If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable totimely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determinednot to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of the ADSs from NasdaqGlobal Select Market or deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of the ADSs in the UnitedStates. The enforcement of stricter advertisement laws and regulations in the PRC may adversely affect our business and our profitability. In April 2015, the Standing Committee of the National People’s Congress promulgated the PRC Advertising Law, effective on September 1, 2015and amended on October 26, 2018. According to the Advertising Law, advertisements shall not have any false or misleading content, or defraud or misleadconsumers. Furthermore, an advertisement will be deemed as a “false advertisement” if any of the following situations exist: (i) the advertised product orservice does not exist; (ii) there is any inconsistency that has a material impact on the decision to purchase in what is included in the advertisement with theactual circumstances with respect to the product’s performance, functions, place of production, uses, quality, specification, ingredient, price, producer, term ofvalidity, sales condition, and honors received, among others, or the service’s contents, provider, form, quality, price, sales condition, and honors received,among others, or any commitments, among others, made on the product or service; (iii) fabricated, forged or unverifiable scientific research results, statisticaldata, investigation results, excerpts, quotations, or other information have been used as supporting material; (iv) effect or results of using the good orreceiving the service are fabricated; or (v) other circumstances where consumers are defrauded or misled by any false or misleading content. See “Item 4.Information on the Company—B. Business Overview—Regulation—Regulations On Advertisement” for further details. 41Table of Contents Our current marketing relies on advertising, via both online and offline channels. The laws and regulations of advertising are relatively new andevolving and there is substantial uncertainty as to the interpretation of “false advertisement” by the SAIC. If any of the advertisements that we publish isdeemed to be a “false advertisement” by the SAIC or its local branch, we could be subject to various penalties, such as discontinuation of publishing thetarget advertisement, imposition of fines and obligations to eliminate any adverse effects incurred by such false advertisement. Some of our outdooradvertisements has historically been deemed as giving misstatement, resulting in fines by the local SAIC. The amount of the fine was not significant. Wecannot assure you that the advertisement we publish in the future will not be subject to further penalties. And any such penalties may disrupt our businessand our competition with competitors, which could affect our results of operations and financial conditions. Certain of our leased property interests may be defective and we may be forced to relocate operations affected by such defects, which could cause asignificant disruption to our business. As to most of our leased properties, we are not provided with sufficient property title certificates or other supporting documents to prove thelegitimate possession of the leased properties by the lessors. Our lease agreements therefore may not be enforceable, our rights as the lessee could bechallenged by third parties and we may be forced to relocate if the lessors do not have legitimate rights upon the properties. We cannot assure you that suchdefects could be cured in time, or at all, and our business may be significantly disrupted with additional costs and expenses if we have to relocate. Some of our leases have expired or will expire soon. We may not be able to successfully extend or renew such leases upon expiration of the currentterm on commercially reasonable terms or at all, and may therefore be forced to relocate our affected operations. This could disrupt our operations and resultin significant relocation expenses, which could adversely affect our business, financial condition and results of operations. Moreover, we compete with otherbusinesses for premises at certain locations or of desirable sizes. As a result, even though we could extend or renew our leases, rental payments maysignificantly increase as a result of the high demand for the leased properties. In addition, we may not be able to locate desirable alternative sites for ourfacilities as our business continues to grow and failure in relocating our affected operations could adversely affect our business and operations. Most of our lease agreements have not been registered with relevant governmental authorities. Failure to register the lease agreement will not affectits effectiveness between the lessor and the lessee, but such defectiveness may subject us to administrative fines, which will have a negative impact upon ourfinancial results. Although the planned purpose of certain of our leased properties is for residence only, we lease from our lessors for purpose of business. Pursuant torelevant laws and regulations, if our lessors have not obtained the consent of the owners of other properties in the same building in advance, the other ownersmay request our lessors to remove the impairment and compensate for their damages. Under such circumstances, our lessors may force us to relocate and ourbusiness will be interrupted. We have been and may in the future be involved in legal and administration proceedings initiated by government authorities, property owners orany other third parties regarding our leasehold interests in or use of such properties. We cannot assure you that we can successfully defend ourselves againstthose claims or that our use of such leased properties will not be challenged in the future. In the event that our use of properties is successfully challenged, wemay be subject to fines and forced to relocate the affected operations. In addition, we may become involved in disputes with the property owners or thirdparties who otherwise have rights to or interests in our leased properties. We can provide no assurance that we will be able to find suitable replacement siteson terms acceptable to us on a timely basis, or at all, or that we will not be subject to material liability resulting from third parties’ challenges on our use ofsuch properties. As a result, our business, financial condition and results of operations may be materially and adversely affected. 42Table of Contents We may be required to register our business premises outside of our registered residence addresses as branch offices under PRC law. Under PRC law, a company doing business at a fixed venue outside its registered residence address is required to register with the local branch of theSAIC where the business premise is located to set it up as branch office and obtain business license. We currently have set up more than 1,300 service centersoperated by ourselves or our third-party local partners in China, among which more than 600 are operated by ourselves. We have not been able to completethe registration or establish branch offices for each of business premise operated by ourselves, and some of our service centers have been fined for suchviolation by the governmental authority as a result. The amounts of the fines were not significant. We have been making continual efforts to register and setup branch offices nationwide for our newly opened business premise and we cannot assure you that all required registration can be completed in a timelymanner, due to the rapid growth of our business across the country and complex procedural requirements of governmental authority. If the PRC regulatoryauthorities determine that we are in violation of the relevant laws and regulations, we may be subject to penalties, including fines, confiscation of income andsuspension of operation and our business, results of operations and financial condition could thus be adversely affected. Risks Related to Our ADSs The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. Since our ADSs became listed on Nasdaq on June 27, 2018, the trading price of our ADSs has ranged from US$2.81 to US$10.49 per ADS in 2018.The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad marketand industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in Chinathat have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highlyvolatile for factors specific to our own operations, including the following: · variations in our revenues, earnings and cash flow; · actual or anticipated fluctuations in our quarterly results of operations; · announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; · announcements of new service offerings, solutions and expansions by us or our competitors; · changes in financial estimates by securities analysts; · conditions in China’s used car market and used car consumer financing market; · changes in the operating performance or market evaluations of other used car e-commerce platforms; · detrimental adverse publicity about us, our services or our industry; · additions or departures of key personnel; · release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; · short seller reports that make allegations against us or our affiliates, even if unfounded; · potential litigation or regulatory investigations; and · general economic or political conditions in China or elsewhere in the world. 43Table of Contents Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade. We have been named as a defendant in six class action lawsuits, which could divert a significant amount of our management’s attention and otherresources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Anysuch class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim issuccessfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition andresults of operations. See “—Risks Related to Our Business and Industry—We have been named as a defendant in six putative shareholder class actionlawsuits that could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.” and “Item 8,Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others frompursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial. We have a dual-class share structure such that our ordinary shares consists of Class A ordinary shares and Class B ordinary shares with disparatevoting powers. In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares will be entitled to one vote per share, while holdersof Class B ordinary shares will be entitled to ten votes per share based on our proposed dual-class share structure. Each Class B ordinary share is convertibleinto one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under anycircumstances. Upon (i) any direct or indirect sale, transfer, assignment or disposition of Class B ordinary shares by a holder thereof or direct or indirecttransfer or assignment of the voting power attached to such number of Class B ordinary shares through voting proxy or otherwise to any person or any entitywhich is not an affiliate of such holder, or (ii) the direct or indirect sale, transfer, assignment or disposition of a majority of the issued and outstanding votingsecurities of, or the direct or indirect transfer or assignment of the voting power attached to such voting securities through voting proxy or otherwise, or thedirect or indirect sale, transfer, assignment or disposition of all or substantially all of the assets of, a holder of Class B ordinary shares to any person that is notan affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares,or (iii) of Mr. Kun Dai ceases to be the ultimate beneficial owner of any outstanding Class B ordinary shares. As of February 28, 2019, Mr. Kun Dai, the beneficially owner of all our issued Class B ordinary shares, beneficially owned 40.2% of the aggregatevoting power of our company. As a result of the dual-class share structure and the concentration of ownership, holders of Class B ordinary shares will haveconsiderable influence over matters such as decisions regarding mergers and consolidations, election of directors and other significant corporate actions.Such holders may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay orprevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for theirshares as part of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate mattersand could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares andADSs may view as beneficial. The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. S&P Dow Jones and FTSE Russell have recently announced changes to their eligibility criteria for inclusion of shares of public companies oncertain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use ofmultiple class structures. As a result, the dual class structure of our ordinary shares may prevent the inclusion of our ADSs representing Class A ordinaryshares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seekto cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our ADSs. Any actions orpublications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of ourADSs. 44Table of Contents If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regardingthe ADSs, the market price for the ADSs and trading volume could decline. The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one ormore analysts who cover us downgrade our ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or failto regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the ADSsto decline. The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price. Sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market priceof the ADSs and materially impair our ability to raise capital through offerings of equity or equity linked securities in the future. As of February 28, 2019, wehad 880,678,805 ordinary shares outstanding, comprising of (i) 839,868,944 Class A ordinary shares (excluding the 23,501,589 Class A ordinary sharesissued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our ShareIncentive Plan), and (ii) 40,809,861 Class B ordinary shares. Among these shares, 408,888,072 Class A ordinary shares are in the form of ADSs, which arefreely transferable without restriction or additional registration under the Securities Act. The remaining Class A ordinary shares outstanding and the Class Bordinary shares will be available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. To ourknowledge, certain of our shareholders, including those affiliated with Mr. Kun Dai, our chairman and chief executive officer, had pledged a total of93,170,300 Class A ordinary shares that represent approximately 10.6% of our share capital as of February 28, 2019 in favor of third-party lenders inconnection with certain loans in an aggregate principal amount of approximately US$213.1 million, most proceeds of which were used to fund the purchaseof shares in our company in the latest rounds of pre-IPO equity financings and which will become due and payable in June, November and December 2019.See “Item 6. Directors, Senior Management and Employees—E. Share Ownership footnote (1).” Subsequent to our initial public filing, the loan agreementswith the third-party lenders were amended to add margin call provisions and top-up requirements regarding our shares. If any lender enforces its securityinterests in such pledged shares upon an event of default, triggering of the margin call and top-up requirements or other circumstances, or any borrower needsto use the pledged shares to repay the loan, the pledged shares may be sold on the public market. For example, in connection with a loan in the principalamount of US$100.0 million under a facility agreement entered into between Kingkey New Era Auto Industry Limited as borrower and Cathay Rong IVLimited as lender, Cathay Rong IV Limited enforced its security interests in shares pledged by Kingkey New Era Auto Industry Limited and as a result,57,045,450 Class A ordinary shares were transferred to Cathay Rong IV Limited. Cathay Rong IV Limited may hold or dispose of these securities at itsdiscretion, including on the public market, as repayment of the outstanding loan and satisfaction of other obligations under the facility agreement. See “Item6. Directors, Senior Management and Employees—E. Share Ownership footnotes (7) and (10).” We cannot predict what effect, if any, market sales ofsecurities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price ofthe ADSs. Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for return on your investment. We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. Asa result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for anyfuture dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. Inaddition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. UnderCayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may adividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board ofdirectors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations andcash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractualrestrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirelyupon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which youpurchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs. 45Table of Contents Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of ourClass A ordinary shares and the ADSs. Our memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engagein change-of-control transactions, including a dual-class voting structure that gives disproportionate voting power to the Class B ordinary shares held by XinGao Group Limited, of which our founder, chairman and chief executive officer, Mr. Kun Dai, is the sole shareholder and sole director. Through Xin GaoGroup Limited, and other entities affiliated with Mr. Dai which hold Class A ordinary shares, Mr. Dai beneficially owned an aggregate of 40.2% of the totalvoting power of our company as of February 28, 2019. These provisions could have the effect of depriving our shareholders of an opportunity to sell theirshares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similartransaction. Our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix theirdesignations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, includingdividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rightsassociated with our Class A ordinary shares, in the form of the ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay orprevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, theprice of the ADSs may fall and the voting and other rights of the holders of our Class A ordinary shares and the ADSs may be materially and adverselyaffected. You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we areincorporated under Cayman Islands law. We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum andarticles of association, the Companies Law (2018 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders totake action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a largeextent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicialprecedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding,on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearlyestablished as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a lessdeveloped body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies ofcorporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federalcourt of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or toobtain copies of lists of shareholders of these companies. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may beinspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain theinformation needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. 46Table of Contents As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken bymanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the UnitedStates. For a discussion of significant differences between the provisions of the Companies Law of the Cayman Islands and the laws applicable to companiesincorporated in the United States and their shareholders. Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of ourcurrent operations are conducted in China. In addition, most of our current directors and officers are nationals and residents of countries other than the UnitedStates. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring anaction against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federalsecurities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unableto enforce a judgment against our assets or the assets of our directors and officers. The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct thevoting of the Class A ordinary shares underlying your ADS. Holders of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attendgeneral meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which are attached to theunderlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions ofthe deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as the holder of the underlyingClass A ordinary shares represented by your ADSs. Upon receipt of your voting instructions, the depositary will try, as far as is practicable, to vote theunderlying Class A ordinary shares represented by your ADSs in accordance with your instructions. Where any matter is to be put to a vote at a generalmeeting, then upon receipt of your voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with theseinstructions. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares unless you withdraw theshares, and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may notreceive sufficient advance notice of the meeting to withdraw the underlying shares represented by your ADSs and become the registered holder of such sharesto allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at thegeneral meeting. In addition, under our memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attendand vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of ourregister of members or the setting of such a record date may prevent you from withdrawing the underlying Class A ordinary shares represented by your ADSsand becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly.Where any matter is to be put to a vote at a general meeting, the depositary will notify you of the upcoming vote and will arrange to deliver our votingmaterials to you. Under our memorandum and articles of association, the minimum notice period required to be given by our company to our registeredshareholders for convening a general meeting is seven days. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensurethat you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. In addition, the depositary and its agents arenot responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able toexercise your right to direct how the underlying shares represented by your ADSs are voted and you may have no legal remedy if the underlying sharesrepresented by your ADSs are not voted as you requested. 47Table of Contents You may experience dilution of your holdings due to the inability to participate in rights offerings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositarywill not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt fromregistration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but isnot required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption fromregistration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or toendeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and mayexperience dilution of their holdings as a result. You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when itdeems it expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, includingin connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on itsbooks for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse todeliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or thedepositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of thedeposit agreement, or for any other reason. We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements. We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicableto other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestationrequirements of Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we remain an emerging growth company. In addition, the JOBS Act providesthat an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company isotherwise required to comply with such new and revised accounting standards. Although we have adopted all the new accounting standards that havebecome effective so far, we intend to take advantage of the extended transition period for complying with new or revised accounting standards in the future.If we elect not to comply with such auditor attestation requirements or take advantage of other exemptions permitted under the JOBS Act, our investors maynot have access to certain information they may deem important and our financial statements may not be comparable to companies that comply with publiccompany effective dates for new and revised accounting standards. We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.” As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Actof 2002, as well as rules subsequently implemented by the SEC and Nasdaq Global Select Market, impose various requirements on the corporate governancepractices of public companies. As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company”pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwiseapplicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also permitsan emerging growth company to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However,we do not plan to “opt out” of such exemptions afforded to an emerging growth company. 48Table of Contents After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort towardensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, asa result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls anddisclosure controls and procedures. Operating as a public company also makes it more difficult and more expensive for us to obtain director and officerliability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similarcoverage. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to findqualified persons to serve on our board of directors or as executive officers. We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicableto U.S. domestic public companies. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulationsin the United States that are applicable to U.S. domestic issuers, including: · the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; · the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under theExchange Act; · the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiderswho profit from trades made in a short period of time; and · the selective disclosure rules by issuers of material nonpublic information under Regulation FD. We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our resultson a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material eventswill also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and lesstimely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or informationthat would be made available to you were you investing in a U.S. domestic issuer. As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governancematters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholdersthan they would enjoy if we complied fully with the Nasdaq corporate governance listing standards. As a Cayman Islands exempted company listed on the Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However,Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practicesin the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. Currently, we rely onhome country practice as our audit committee consists of two independent directors. We also relied on home country practice in adopting our 2018 SecondAmended and Restated Share Incentive Plan in November 2018 without seeking shareholder approval. However, if we choose to follow home countrypractice in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq governance listing standardsapplicable to U.S. domestic issuers. 49Table of Contents We may be classified as a passive foreign investment company, or PFIC, which could result in adverse U.S. federal income tax consequences to U.S.holders of the ADSs or Class A ordinary shares. A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company (a “PFIC”) for U.S. federal income taxpurposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income, or (ii) 50% or more ofthe value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or areheld for the production of passive income (the “asset test”). A separate determination must be made after the close of each taxable year as to whether a non-U.S. corporation is a PFIC for that year. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchangeof property producing such income and net foreign currency gains. For this purpose, cash and assets readily convertible into cash are categorized as passiveassets and our goodwill associated with active business activity is taken into account as a non-passive asset. In addition, a non-U.S. corporation will be treated as owning a proportionate share of the assets and earning a proportionate share of the income ofany other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock. Although the law in this regard is unclear, we treat ourVIEs as being beneficially owned by us for U.S. federal income tax purposes because we control their management decisions, we are entitled to substantiallyall of the economic benefits associated with these entities, and, as a result, we consolidate their results of operations in our U.S. GAAP financial statements. Ifit was determined, however, that we are not the owner of the VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxableyear and any subsequent taxable year. Even assuming that we are the owner of the VIEs for U.S. federal income tax purposes, it is possible that certain portions of our income from andassets used to generate our loan facilitation revenue may be treated as passive under the PFIC provisions. In such event, based on our current and expectedincome and assets and the market value of our ADSs, it is possible that we could be a PFIC for the taxable year ending December 31, 2018 or in theforeseeable future. Based on our interpretation of the facts and the applicable law, we do not presently believe this to be the case. Nevertheless there areuncertainties regarding the nature of parts of our income and the application of the law to those facts, and it is therefore possible that the Internal RevenueService (the “IRS”), may challenge our classification of certain portions of our income and assets as non-passive. Accordingly, no assurances can be giventhat we are not a PFIC for the taxable year ending December 31, 2018 and will not be a PFIC in the current or future taxable years. Even if we are not currentlya PFIC, changes in the nature of our income or assets, or fluctuations in the market price of our ADSs and Class A ordinary shares, may cause us to become aPFIC for future taxable years. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets.Under circumstances where certain portions of our loan facilitation revenue or revenue from other activities that produce passive income increase relative toour revenue from activities that produce non-passive income or where we determine not to deploy significant amounts of cash for working capital or otherpurposes, our risk of becoming classified as a PFIC may substantially increase. If we are classified as a PFIC for any taxable year during which a U.S. Holder (defined below) held an ADS or an ordinary share, certain adverse U.S.federal income tax consequences could apply to the U.S. Holder. See “Item 10. Additional Information—E. Taxation—United States Federal IncomeTaxation—Passive Foreign Investment Company Rules.” Item 4. Information on the Company A. History and Development of the Company We commenced operations in August 2011 through Youxin Internet (Beijing) Information Technology Co., Ltd., or Youxin Hulian, to conduct usedcar auctions and other transaction related services. In December 2011, we incorporated Uxin Limited in the Cayman Islands as our offshore holding company to facilitate financing and offshorelisting. Shortly following its incorporation, Uxin Limited established a wholly-owned subsidiary in Hong Kong, Uxin Hong Kong Limited. In June 2012, inconnection with our Series A financing, Uxin Hong Kong Limited established a wholly-owned subsidiary in China, Youxinpai (Beijing) InformationTechnology Co., Ltd., referred to as Youxinpai or one of our WFOEs. Since its incorporation, Youxinpai has established and acquired several wholly-ownedsubsidiaries, among which are Youhan (Shanghai) Information Technology Co., Ltd., or Youhan, and Baogu Automobile Technology Services (Beijing)Co., Ltd. 50Table of Contents In July 2014, we established Perfect Harmony Group Limited, a wholly-owned subsidiary of Uxin Limited. In April 2015, Perfect Harmony GroupLimited acquired certain of the equity interests in Fairlubo Auction Company Limited and as of the date of this annual report it holds 85.88% of the equityinterests therein on a fully diluted basis after taking into account the equity incentive plan of Fairlubo. Fairlubo Auction Company Limited establishedFairlubo Auction HK Company Limited, which in turn established a wholly-owned subsidiary, Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd.,referred to as Youxin Lubao or one of our WFOEs. In June 2018, Fairlubo Action Company Limited, through its affiliate, acquired 100% of the equity interestof Zhejiang Dongwang Internet Technology Corporation and a portion of the consideration for the acquisition was paid in 20,225,145 ordinary shares ofFairlubo Action Company Limited with par value US$0.0001 per share. In November 2014, we established UcarShow Holding Limited, a wholly-owned subsidiary of Uxin Limited. UcarShow Holding Limited establishedUcarShow HK Limited in Hong Kong. In January 2015, we established Uxin Used Car Limited, and in February 2015, UcarShow Holding Limited transferredall the interests it held in UcarShow HK Limited to Uxin Used Car Limited. In March 2015, UcarShow HK Limited established a wholly-owned subsidiary,Yougu (Shanghai) Information Technology Co., Ltd, or Yougu. Yougu acquired Youzhen (Beijing) Business Consulting Co., Ltd. from Youxinpai inSeptember 2016. In November 2014, we established UcarEase Holding Limited, a wholly-owned subsidiary of Uxin Limited. UcarEase Holding Limited acquiredGloryFin International Group Holding Company Limited, which was incorporated in Hong Kong. GloryFin International Group Holding Company Limitedhas three wholly-owned subsidiaries, Kai Feng Finance Lease (Hangzhou) Co., Ltd., or Kaifeng, Youqin (Shanxi) Finance Lease Co., Ltd., and Boyu FinanceLease (Tianjin) Co., Ltd. In November 2014, we established UcarBuy Holding Limited, a wholly-owned subsidiary of Uxin Limited. UcarBuy Holding Limited establishedUcarBuy HK Limited, which established a wholly-owned subsidiary, Youxin (Shanghai) Used Car Business Co., Ltd., which we refer to as Youxin Shanghai. Youxinpai, Yougu and Youxin Lubao later entered into a series of contractual arrangements with Youxin Internet (Beijing) Information TechnologyCo., Ltd., Youxin Yishouche (Beijing) Information Technology Co., Ltd., and Beijing Fengshun Lubao Vehicle Auction Co., Ltd., respectively, referred to asYouxin Hulian, Yishouche and Fengshun Lubao or, collectively, our VIEs, and their respective shareholders. Youhan currently operates the website www.youxinpai.com and mobile apps for our 2B business. Youhan has obtained approval from ShanghaiCommunications Administration to conduct value-added telecommunications services in the scope of online data processing and transaction processing(operating e-commerce). Yougu operates the website www.xin.com and mobile apps for our 2C business. Yougu has obtained approval from ShanghaiCommunications Administration to conduct value-added telecommunications services in the scope of online data processing and transaction processing(operating e-commerce). We currently conduct our consumer auto loan facilitation services in China through our wholly owned subsidiary Kaifeng and otherwholly-owned onshore subsidiaries. We have recently established Youqin (Shanxi) Finance Lease Co., Ltd. to conduct our auto loan facilitation business. Weconduct salvage auction services primarily through our VIE, Fengshun Lubao, its wholly-owned subsidiaries and our WFOE, Youxin Lubao. On June 27, 2018, our ADSs commenced trading on Nasdaq under the symbol “UXIN.” We raised from our initial public offering US$204.8 millionin net proceeds after deducting underwriting commissions and the offering expenses payable by us. B. Business Overview We are the largest used car e-commerce platform in China in terms of the number of transactions facilitated in 2018, according to iResearch. As thedestination for online used car transactions in China, we make it possible for consumers to buy cars from dealers, and for dealers to buy cars from other dealersand consumers, through an innovative integrated online and offline platform. 51Table of Contents Our mission is to enable people to buy the car of their choice. Both consumers and businesses in China face significant challenges in buying andselling used cars, such as access to a limited number of vehicles, incomplete and unreliable information about vehicles, and complex transaction processes.Our platform addresses these issues by enabling consumers and businesses to discover, evaluate and transact in used cars throughout China, providing areliable and one-stop transaction experience. Our platform consists of two highly synergistic businesses: · Uxin Used Car ( ): our 2C business catering to consumer buyers, primarily provides consumers with nationwide selection of usedcars, customized car recommendations, standardized reports of car conditions, financing, title transfer, delivery, insurance referral, warranty andother related services; and · Uxin Auction ( ): our 2B business catering to business buyers, primarily provides businesses with a comprehensive suite of solutions,helping them source vehicles, optimizing their turnover and facilitating transactions among dealers of different sizes across China. We have transformed used car commerce in China through our innovative integrated online and offline approach that addresses each step of thetransaction and covers the entire value chain. Our highly scalable online platform allows sellers to reach a broad audience and ensures that users have accessto an extensive nationwide selection of used cars. Our offline infrastructure allows us to provide services that are important to enabling transactions, such asthe inspection, title transfer and delivery of vehicles, in-person consultation and other after-sale services. In particular, our inspection capabilities allow us tocollect proprietary data, images and videos of vehicles and generate accurate car condition reports that allow for standardized comparisons, which are crucialto our users’ online purchase decision-making processes. With a significant amount of data on buyers, sellers, vehicles and transactions on our platform, weare able to continue to innovate and improve our services to meet the varied needs of our users. Together, our services provide users with the superiorexperience and peace of mind that our brand embodies in fact our name—Uxin ( ) translates to quality and trust in Chinese. Our comprehensive services are supported by a number of critical foundations, including proprietary technology and data analytics capabilities, anextensive service network and unique transaction enabling capabilities. · Data and Technology: Our patented and industry-leading car inspection system, Check Auto ( ), provides a comprehensive overview of aused car’s condition, while our AI- and big data-driven Manhattan pricing engine evaluates a car’s condition and provides buyers and sellerswith pricing insights. Our Manhattan pricing engine also enables us to forecast the residual value of vehicles with greater accuracy. Byleveraging both the Manhattan pricing engine and our proprietary Sunny risk control system, which makes credit assessments of prospectiveborrowers, we effectively monitor car collateral and manage our risk exposure. Currently, our AI-enabled credit assessment system couldautomatically process approximately 80% of auto loan applications. In addition, based on the plethora of data we have on our users’ browsinghistory, behavior and preferences, our Lingxi ( ) smart selection system provides highly personalized recommendations to consumers,making it more likely for them to find their cars of choice. Additionally, we provide 360-degree online car viewing functionality, enabled byVR technology, for the best-selling makes and models with “super value” tags on our platform. · Uxin Service Network: We currently have a nationwide network of over 1,300 service centers operated by ourselves or our third-party localpartners in more than 400 cities at prefecture level or above, with business operations, covering 900 cities and regions of all levels of China’sadministrative divisions. We leverage our service network to provide buyers and sellers with services and assistance at each step of thetransaction cycle. Starting from December 2018, we have adopted a franchised model, under which the service centers are operated by our third-party local partners, to complement service centers operated by ourselves in the effort to effectively expand our service centers across China. Webelieve our physical presence in consumers’ neighborhoods provides them with convenient access to our services, allowing us to further buildtrusted relationships with them. We also operate seven regional transaction centers to support transactions in our 2B business. · Uxin Transaction Enabling Capabilities: Our unique transaction enabling capabilities currently cover more than 400 cities at prefecture levelor above and consist of our nationwide delivery and fulfilment network, title transfer services and industry-leading warranty program. Our titletransfer services quickly handle a potentially time-consuming and complex process for our buyers. Our warranty program provides consumerswith comprehensive post-sale protection. 52Table of Contents We also collaborate with a large number of third-party partners to provide financing products, insurance referrals, and other services through ourplatform. For example, our financing partners assess buyers’ credit and fund the loans facilitated through our platform, making used car purchases easy. Thisalso allows us to establish ongoing relationships with our customers to serve them for other post-transaction needs including their next car purchase. In December 2018, we entered into a strategic partnership with Taobao, China’s massive and fast-growing consumer community operated by AlibabaGroup Holding Limited. Under the partnership, we will collaborate with Taobao in the areas of B2C and B2B used car transactions, integrated supply chain,and used car loan facilitation. As part of the agreement, we have jointly established an online used car shopping mall on Taobao Marketplace. At the initialstage, we will provide a full suite of used car product and service offerings ranging from intelligent listing, displaying and matching, to one-stop transactionsolutions. We also intend to collaborate on the enhancement of advanced data analysis in areas including intelligent used car recommendation and userbehavior analysis which can help us enhance risk profiling and management capabilities. As our platform grows, more buyers tend to attract more sellers, which in turn will engage additional buyers with a broader selection of used cars,driving significant network effects. In addition, a growing number of buyers and sellers will attract more third-party service partners, expand the offerings onour platform and help form a vibrant ecosystem. Since our inception in 2011, we have witnessed significant growth in our business. The total number of usedcars sold through our platform has increased from 377,777 in 2016 to 634,317 in 2017 and further to 814,498 in 2018, representing a 67.9% and 28.4%increase, respectively. The total GMV of our platform has grown from RMB26.0 billion in 2016 to RMB43.4 billion in 2017 and further to RMB55.1 billion(US$8.0 billion) in 2018, representing a 67.0% and 26.9% increase, respectively. Our Platform and Services As the destination of choice for used car transactions in China, we enable consumers to buy cars from dealers, and dealers to buy cars from bothdealers and consumers through an innovative integrated online and offline platform. We mainly generate revenues from the fees we charge for facilitatingused car transactions and consumer auto loans. Our 2C business Uxin Used Car (), our 2C business, caters to consumer buyers and provides them with customized recommendations, financing,insurance referral, delivery, title transfer, warranty and other transaction related services. Sellers in our 2C business are typically small- or medium-sized retaildealers of used cars. Our 2C business generates revenues from the fees we charge for transaction facilitation and loan facilitation services. Our used cartransaction facilitation service take rate, as defined by the used car transaction facilitation revenue divided by the GMV of our 2C business, increased from0.5% in 2016 to 0.9% in 2017 and further to 1.6% in 2018. The GMV of our 2C business also includes certain free-of-charge intra-regional transactions wefacilitate without financing solutions attached. Our loan facilitation average service fee rate, as measured by the used car loan facilitation revenue divided bythe total amount of used car loans facilitated, was 5.1%, 6.2% and 7.0% in 2016, 2017 and 2018, respectively. Since its launch in 2015, Uxin Used Car has achieved significant scale and growth. We had a real-time listing of approximately 200,000 used cars inthe fourth quarter of 2018. The current real-time listing is approximately 130,000 used cars due to seasonality. In 2016, 2017 and 2018, our 2C businessfacilitated 130,076, 283,829 and 494,826 used car transactions, respectively, resulting in GMV of approximately RMB15.7 billion, RMB26.0 billion andRMB39.8 billion (US$5.8 billion), respectively. In particular, our cross-regional transactions experienced exponential growth in the fourth quarter of 2018 asa result of our sustained investment and have since contributed an increasingly significant part of our transaction volume. In the fourth quarter of 2018, our2C business facilitated over 22,000 cross-regional used car transactions, compared to just over 400 in the first quart of 2018, generating GMV ofapproximately RMB2.5 billion (US$363.6 million) in the fourth quarter of 2018, compared to RMB67.0 million in the first quarter of 2018. Our 2C cross-regional revenues were RMB240.0 million (US$34.9 million) in the fourth quarter of 2018, compared to RMB5.2 million in the first quarter of 2018. Our 2Ccross-regional transaction facilitation revenues and 2C cross-regional loan facilitation revenues were RMB128.3 million (US$18.7 million) and RMB111.7million (US$16.2 million), respectively, in the fourth quarter of 2018, compared to RMB3.0 million and RMB2.2 million, respectively, in the first quart of2018. In addition, our used car transaction facilitation service take rate for cross-regional transactions increased to over 5% in the fourth quarter of 2018 fromover 4% in the first quarter of 2018. 53Table of Contents In December 2016, we launched our loan facilitation service for new cars, which enables consumers to browse new car listings and makeappointments to check the cars at 4S Stores on our platform. In addition, with the assistance of our sales consultants, consumers can also have various choicesof financing products offered by our platform. In December 2016, December 2017 and December 2018, Uxin Used Car had approximately 12.5 million, 14.0 million and 24.4 million MAUs,respectively. User journey on our 2C business For a typical consumer on Uxin Used Car, the buying journey is as follows: · Online search: We provide an intuitive user interface to help consumers navigate through a vast selection of used cars. Consumers can searchby brand, price and other features. Our platform also makes personalized recommendations by leveraging our proprietary Lingxi smart selectionsystem. · Evaluation: To improve transparency of the transaction process and strengthen consumer trust, each car listing includes an in-depth carcondition report generated by our Check Auto system, including photos and videos of the interior and exterior of the car, records of prioraccidents, repair and maintenance history, among others. The consumer can also review historical purchase prices for similar cars to easilycompare the offer price with historical data to assess the fair market value of the listed car. Moreover, our Manhattan pricing engine also makesassessments on the fair value of listed cars, classifying with “super value” tags used cars of particularly good value as assessed through historicalregression analysis applied to the car’s selling price and condition. We also provide 360-degree online car viewing functionality, enabled byour VR technology, for the best-selling makes and models with “super value” tags on our platform. Our systems also accommodate easycomparison of different car listings across a multitude of features, including price, mileage, location and warranty. All this enables the consumerto make an informed buying decision. · Services: While searching for cars, a consumer can view and choose from various auto financing products offered on our platform, which webelieve significantly lower the barrier to purchasing used cars. The consumer can also choose from other services provided by third parties onour platform, including auto insurance and delivery. · Customer support: At any step of the transaction process, the consumer can contact our sales consultants through online chat or through toll-free hotlines. The consumer can also visit one of our service centers where our sales consultants can accompany the consumer to inspect cars inperson or walk the consumer through Check Auto condition reports, and answer the consumer’s questions about cars or our services.Alternatively, at the customer’s request, our sales consultants can visit the consumer and provide services in person. Our A1-enabled salesconsultant assistance system recommends cars and services to assist our sales consultants. · Signing and delivery: Once the consumer decides to buy a car, the consumer signs a purchase agreement and makes payment in person in oneof our service centers. Alternatively, at the customer’s request, our sales consultants can assist the customer to complete the transaction inperson. If the consumer has selected our delivery service, the consumer typically receives the car in a few business days. · Post-transaction warranty: To strengthen consumer trust in our platform, we further upgraded the car certification process on our platform, UxinCertified (), into “gold” and “silver” categories following our initial public offering. Every Uxin Certified listing carries a 30-dayreturn policy covering certain major damages caused by severe accidents provided that such damages exist as of the date of sale. In addition, weprovide one-year or 20,000-kilometer warranty covering both maintenance and repair of 15 major structural components to cars certified as“gold”, and half-year or 10,000-kilometer warranty covering both maintenance and repair of 5 major structural components for cars certified as“silver”. When a consumer chooses to make a return under our 30-day return policy, which has occurred for only less than 0.1% of all cars soldthrough our 2C business, we either return the car to the car dealer that sold it, or reclaim any losses incurred from such dealer. We provide awarranty, as well as a 3-day no-questions-asked return policy for cars sold cross-regionally and tagged as “super value”, to consumers for noextra charge over our transaction facilitation service fee. 54Table of Contents For a typical business seller on Uxin Used Car, the selling journey is as follows: · Car inspection: Once a seller indicates the intention to sell cars, we will arrange for a standard inspection of the cars by our Check Auto carinspection system. · Listing: After the inspection, the cars are listed on our platform for sale. Each car listing is accompanied by a Check Auto condition report.Additionally, our local employees regularly check the seller’s inventory by employing a systematic approach that includes using scanningtechnology and image recognition software to ensure that the listing is authentic and kept up-to-date. If the listing price submitted by the selleris excessively high compared to the fair value estimate of our Manhattan pricing engine, we will notify the seller and suggest the seller to adjustthe listing price before the car is listed on our platform. · Seller support: Our sales consultants provide online and offline assistance to the seller throughout the transaction process. The seller can alsoreview key statistics and trends of the local used car market online. · Signing and delivery: Once the seller agrees to sell a car, the seller will sign an agreement in person. The car may then be delivered to either thebuyer’s home or to one of our local service centers for easy pickup, depending on the price paid. If the car is sold to a consumer in a differentcity from the seller, the seller can arrange for delivery using our nationwide delivery and fulfillment network. Consumer auto loan facilitation services We facilitate consumer auto loans for both new and used cars transactions through our 2C business by leveraging our transaction-centric platformand industry-leading AI and big data capabilities. We have entered into arrangements with third-party financing partners, pursuant to which funding for theconsumer auto loans facilitated through our platform are primarily provided by such partners, while we provide services to financing partners and consumersto facilitate the loans. The consumer auto loans we facilitate through our platform include loans for both used cars and new cars. Our loan facilitation servicesmainly generate revenues from the fees we charge consumers for facilitating auto loans. In 2018, we facilitated 228,082 used car loans with a total principalamount of RMB22.2 billion (US$3.2 billion) and 33,426 new car loans with a total principal amount of RMB3,345.2 million (US$486.5 million). 55Table of Contents Consumer auto loans facilitated through our platform. Consumers can choose from a broad range of auto loan options through our platform. Forused car loans, consumers make upfront payments of 10% to 50% of the car prices. For used car loans facilitated in 2018, our weighted average effective loan-to-value ratio for used car loans at inception was around 75% and our weighted average term of used car loans is approximately 36 months, each weighted bythe used car loan amount facilitated by us in 2018. The used car financing fee spread charged by us, defined as the spread between consumers’ annualizedtotal cost (which includes interest and the lump sum service fee we collect from consumers at the inception of the loans) and effective annual rate of return ofinterests paid to financing partners, was approximately 6-10%. Prior to the second quarter of 2018, we collected interest from consumers upfront on behalf ofthe financing partners, and we disbursed the deposits of interest to the financing partners during the loan tenor. As a result, the down payments made by theconsumers included (a) down payments to car dealers and (b) deposits of interest and loan facilitation service fees to us. Since the second quarter of 2018, wehave ceased the practice of collecting interest on behalf of the financing partners, and the down payments made by the consumers no longer include depositsof interest. Funding for used car loans facilitated through our platform is primarily provided by our financing partners. Our financing partners also design andapprove the terms of the loans including interest rate and maturity and retain the creditor rights both at funding and over the loan tenor. We prefund theconsumer auto loans facilitated through our platform before we receive the corresponding funding from our financing partners. We record such prefunding toconsumers as advance to consumers on behalf of financing partners until such time when the funding is provided by the original financing partner or analternative financing partner. Outstanding advance to consumers on behalf of financing partners amounted to RMB521.9 million (US$76.0 million) as ofDecember 31, 2018, which was mainly attributable to the auto loans we facilitated for one of our financing partners due to its liquidity constraints. There isno assurance such advance to consumers will be fully funded by our funding partners in time or at all. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business and Industry—We rely on a limited number of third-party financing partners to fund loans facilitated through our platform. Inabilityto maintain sufficient access to funding would materially and adversely affect our liquidity, business, results of operations and financial condition.” The loans are secured by the used cars as collateral. Consumers typically repay the outstanding used car loan balance over two to three-year loantenors to the financing partners. Consumers may also elect under certain types of loan products to entrust us to dispose of the cars, use the proceeds to repaythe final bullet payment and reimburse us for any shortfalls. We also facilitate loans for new cars under similar arrangements, except that consumers do nothave the option of returning the cars in lieu of final bullet payments and that the loan-to-value ratios of new car loans are generally higher than those of usedcar loans. The total outstanding principal balance of loans for new cars represented 12.4% of the total outstanding principal balance of auto loans facilitatedthrough our platform as of December 31, 2018. The following chart summarizes the main types of consumer auto loans offered through our 2C platform: Loans for used cars Loans for newcars Product categoryA B C D E Upfront payment10%30%50%10%20%Tenor (year)2 - 4Total service fee rateApproximately 6% - 14%Annual percentage yieldApproximately 8% - 9% (1) Upfront payment as a percentage of car price, including down payment and total service fee. Since the second quarter of 2018, we have ceased thepractice of collecting interest on behalf of the financing partners, and the down payments made by the consumers no longer include deposits of interest. (2) Total service fee divided by total loan balance at inception of the loan. Total service fee is a lump sum payment we collect from consumers at theinception of the loans for the services performed by us to facilitate the transactions and loans, and the payment comprises components that arerecognized by us as loan facilitation revenue, transaction facilitation revenue, and deferred guarantee liability. Part of the total service fee is recognizedas transaction facilitation revenue when we charge the total service fee and waive transaction facilitation fee for used car purchases financed by loansfacilitated through our 2C business. (3) Effective annual rate of return of interests paid to financing partners. Our services to consumer borrowers. We provide the following services to consumers to facilitate financing transactions on our platform. 56(1)(2)(3)Table of Contents · Online application. Once a consumer decides to apply for an auto loan, consumers can provide loan application information through ourplatform. We then communicate online with third-party financing partners, which make credit assessments and decide whether to approve theloan application. If a loan application is approved by a financing partner after its credit assessment, we then conduct our own credit assessmentto decide whether to guarantee the loan. A loan application on our platform can be funded only after a financing partner has approved theapplication and we have decided to guarantee the loan. · Customer service. Consumers with specific questions regarding financing products or the application process can reach our customer serviceteam through a dedicated financing service hotline or visit one of our service centers. Our services to financing partners. As of December 31, 2018, we had four third-party financing partners, two of which collectively have providedsubstantially all of the funding for consumer auto loans facilitated through our 2C business. We provide the following services to third-party financingpartners: · Customer acquisition. Our platform enables our financing partners to conveniently reach a nationwide customer base. We transmit loanapplications electronically to our financing partners to streamline the loan applications process. We also help answer questions consumers mayhave on the financing products. · Collateral management. Cars purchased through our loan facilitation service are pledged as collateral to secure the loans. We also install GPStrackers on all car collateral to monitor their locations. We can manage car collateral effectively by leveraging our ability to monitor carcollateral and to accurately estimate residual values of car collateral using our data analytics capabilities. · Guarantee. We guarantee full repayments of principal and accrued and unpaid interest to financing partners of all consumer auto loansfacilitated through our platform. As of December 31, 2018, we have contractually arrangement with four financing partners. Depending on ourspecific arrangements with each financing partner, once a loan is in default for more than eight days, we may be obligated to pay any overduepayments to the financing partner. Once a loan is in default for more than 85 days, three consecutive installments, or six installments in total, wemay be obligated to pay the remaining loan balance and any other payments due to the financing partner using our own funds. We also postsecurity deposits to financing partners in the aggregate amount of 12.7%, 9.6% and 8.4% of the aggregate outstanding loan balance of loansoriginated by the financing partner as of December 31, 2016, 2017 and 2018, respectively. If additional loans are originated by a financingpartner through our platform, we post additional security deposits to the financing partner. As of December 31, 2016, 2017 and 2018, our totalguarantee liabilities were RMB76.3 million, RMB173.9 million and RMB321.3 million (US$46.8 million), respectively, and the totaloutstanding principal balance of loans that we facilitated through our platform reached RMB5.3 billion, RMB14.8 billion and RMB27.6billion (US$4.0 billion), respectively, which, plus the accrued and unpaid interests, represents the maximum potential future payments that wecould be required to make under the guarantee. Loan application and risk control. After consumers have submitted their loan applications on our platform, we transmit the loan applicationselectronically to our financing partners through a system that is integrated with our financing partners’, including information about the applicant’s name, IDcard information, driver’s license, and bank card information. The financing partners then make their own credit assessment to decide whether to approve theloan and notify us whether the loan application is approved. If a loan application is approved by a financing partner after its credit assessment, we thenconduct our own assessment to decide whether to guarantee the loan. A loan application on our platform can be funded only after a financing partner hasapproved the application and we have decided to guarantee the loan. During the tenor of the loan, we receive loan performance data from the financingpartners, including whether payments are made on time. As we guarantee the full repayment of all consumer auto loans facilitated through our platform, weadopt a systematic approach to manage our guarantee risk exposure by leveraging our Sunny risk control system. The delinquency rates for used car loans asof December 31, 2018 that were 1 to 29, 30 to 59, 60 to 89 and 90 or more calendar days past due were 0.75%, 0.49%, 0.21% and 1.41%, respectively. 57Table of Contents Our risk control system comprises pre- and post-financing controls. Specifically, we implement the following pre-financing guarantee risk controls: · Verifying transaction authenticity. To mitigate the risk of fraudulent loan applications, we require both the consumer and the selling dealer toprovide identification documents such as identification card and business licenses and check the face ID and profile of the consumer toauthenticate their identity. In addition, our car inspection and data analytics capabilities enable us to verify the authenticity of cars based on thevehicle identification number, or VIN, and the vehicle license information, and to verify the authenticity of a car purchase based in part on theconsumer’s browsing history on our platform. We also utilize our Manhattan pricing engine to detect potential fraudulent loan applications. Forexample, if the asking price of a used car significantly exceeds the fair value of the car produced by Manhattan, this may indicate that the buyerand the seller are colluding to obtain high loan proceeds using a low quality car. · Assessing guarantee risk. After the financing partner’s credit assessment, we assess the risk of guaranteeing the loan by leveraging our Sunnyrisk control system. Sunny calculates a proprietary credit score by taking into account both our proprietary data (such as browsing behavior onour platform and historical transaction-related data) and consumer credit history from third-party sources, including the Credit Reference Center,an independent credit information service institution under the People’s Bank of China. In our design and structuring of loan product offerings,comprising focus such as loan tenor, interest rate and payment frequency, we also ensure that if a borrower defaults, the residual value of vehiclecollateral is sufficient to recover the outstanding loan balance. When Sunny cannot make a determination, our staff will make the assessmentmanually. We also implement the following post-financing risk controls: · Monitoring loan performance. Our Sunny risk control system communicates electronically with our financing partners’ systems to obtain theperformance data of loans facilitated through our platform from our financing partners, including the outstanding balance and whetherpayments are made on time. Based on our proprietary data and data from our financing partners, our Sunny risk control system derives insightson our risk exposure using delinquency rates and visualize these insights. If borrowers are delinquent on their payments, we will contactborrowers through text messages or phone calls or involve third-party service providers as needed based on the severity of the delinquency. · Monitoring collateral. We monitor the location of car collateral using GPS trackers installed on cars, through which we keep a log of GPSsignals received from the cars. Our platform automatically detects abnormalities in the GPS logs of the car collateral and notifies our staff whensuch abnormalities are identified. · Repossession and recovery. If a loan is in default after a certain number of days, we will engage a professional third party to repossess the carcollateral. Our financing partners may also report such borrower to the Credit Reference Center. If necessary, we also seek legal remedies in courtto recover the remaining balance of the defaulted loans. Our GPS trackers on car collateral can help us identify the location of car collateral forrepossession. Agreements with financing partners. We have entered into a cooperation agreement with each of our financing partners, which establishes that thefinancing partner is responsible for providing loans to the borrowers utilizing our platform, after passing credit risk assessments conducted by each of thefinancing partner and us. Under the terms of the cooperation agreements, we are responsible for entering into collateral management agreements withconsumers (as explained below), handling vehicle collateral registration, and keeping the original copy of the vehicle registration certificate of the vehiclecollateral. We are also required to be a guarantor for the loans in the event of default of the loans facilitated, including for the principal, interest, and defaultinterest payable by the borrower. Under the framework set out in the cooperation agreement, each individual loan transaction to a borrower is documented bya borrower service agreement, collateral management agreement, and a tri-party loan agreement, as described below. The financing partner also establishesthe interest rate of the loans in its cooperation agreement with us. The term of our agreements with financing partners ranges from 1 to 5 years, and may beterminated due to a variety of reasons, including significant regulatory changes or material adverse changes to either party. Our agreements with financingpartners may be renewed upon mutual agreement. 58Table of Contents Agreements with consumer borrowers. Under the framework set out in the cooperation agreement, each individual loan transaction to a borrower isdocumented by a borrower service agreement, collateral management agreement, and a tri-party loan agreement. · Borrower service agreement: We enter into the borrower service agreement with the borrower, which specifies that we act as a service providerto the borrower by providing a loan facilitation service in connecting the borrower with the financing partner to allow the individual topurchase the vehicle. This agreement also sets the amount of transaction service fees charged to the borrower. · Collateral management agreement: We enter into the collateral management agreement so that we can hold the title of car collateral on behalfof the financing partner. · Tri-party loan agreement: We enter into the tri-party loan agreement with the borrower and the financing partner, which specifies that thefinancing partner is the creditor and we are the guarantor of the loans facilitated and that all principal payments made by the borrower are to bepaid directly to the financing partner. Agreements with CITIC. In May 2018, we entered into a long-term strategic cooperation framework agreement with China CITIC Bank (“CITIC”),pursuant to which CITIC will design auto loan products tailored for our users, while we provide customer referral, information gathering, and data analyticssupport for CITIC’s loan origination decisions. We have also agreed to recommend our users to apply for and use co-branded credit cards by CITIC to repayauto loans, cooperate on data exchange and risk management, and cross-sell other value-added services to each other’s customers. Agreements with ICBC. In June 2018, we entered into a long-term strategic cooperation agreement with the Industrial and Commercial Bank ofChina (“ICBC”), pursuant to which ICBC will design auto loan products for our users with personalized financing solutions and competitive pricing, whilewe provide customer referral, information gathering, and data analytics support for ICBC’s loan origination decisions. Our 2B business Launched in 2011, our 2B business, Uxin Auction () catering to business buyers with a comprehensive suite of solutions, connectingbusinesses with one another across China, helping them source vehicles, optimizing their turnover and facilitating transactions among dealers of differentsizes across China. Business sellers include used car dealers, 4S dealerships, which are dealerships that are authorized to sell the products of a single brand ofautomobiles and provide key automobile-related services, car rental companies, auto manufacturers and large corporations that may need to dispose of largefleets of used cars. Cars are sold through Uxin Auction through online auctions. As of December 31, 2018, approximately 560,000 cars were listed on ourplatform for auction. In 2016, 2017 and 2018, our 2B business achieved GMV of RMB10.3 billion, RMB17.4 billion and RMB15.3 billion (US$2.2 billion),respectively. Our 2B business mainly generates revenues from the fees we charge for transaction facilitation services. 59Table of Contents User journey on Uxin Auction For a typical buyer on Uxin Auction, the buying journey is as follows: · Online search and notification: A buyer can search and receive notifications of upcoming used car auctions online. In addition, our proprietaryAI technology can push notifications to the buyers who are likely to bid in an auction based on buyers’ profile and transaction history. · Evaluation: All car listings on Uxin Auction include a comprehensive car condition report generated by our Check Auto system. The buyer canalso choose to inspect the car in person in one of our regional transaction centers. · Auction: The buyer can then bid in our virtual trading lobby. · Services: While searching for cars, the buyer can choose from services provided on our platform such as delivery. · Signing and delivery: Once the buyer wins the auction, the buyer enters into an agreement to purchase the car. If the buyer chooses to arrangefor delivery through our platform, the buyer typically receives the car within a few business days. For a typical business seller on Uxin Auction, the seller’s journey is very similar to that of a seller on Uxin Used Car other than selling throughonline auctions. For consumer sellers who wish to sell used cars, we connect the consumer seller with dealers on our platform. We historically provided inspectionand other complementary services that enabled consumers to sell used cars through our 2B business, which was referred to as our C2B business. However,starting in the second half of 2018, we have taken an alternative approach that connects these consumers with quality dealers on our platform without usproviding inspection and other services directly. Our B2B auction business, however, remains unchanged. Virtual trading lobby All 2B transactions are conducted online through a real-time online auction process in our virtual trading lobby. A typical online auction process isrun as follows: · Business sellers and buyers can participate in the auctions after paying a security deposit. Before a car is listed for auction, the seller will submita reserve price for the car below which the car will not be sold and pay a security deposit. · After paying a security deposit, prospective buyers can place their initial bids online. · After the auction starts, each bidder can see in real time the offering price of the highest offer, and whether the bidder is the highest bidder ornot. If a bidder is not the highest bidder, the bidder can increase the offer price to outbid the highest bidder, and the new highest offer price areshown to all bidders in real time. · After certain time has elapsed and if no higher offer has emerged, the auction ends and the car is sold to the highest bidder. However, if thehighest bid is lower than the seller’s reserve price, then the auction is terminated without a sale. · If the auction is successful, but the seller or the buyer fails to complete the transaction, we will forfeit such seller’s or buyer’s deposits.Otherwise, security deposits will be returned. Others In addition to our 2C and 2B businesses, we also generate revenues from other businesses, including salvage car business and dealer inventoryfinancing business. 60Table of Contents Salvage car business Our salvage car business facilitates salvage car transactions. We operate our salvage car business through our subsidiaries, Fairlubo AuctionCompany Limited and Zhejiang Dongwang, using facilities and an online platform that are separate from our 2B and 2C businesses. The sellers are primarily insurance companies, and the buyers are primarily business buyers of salvage cars such as car repair shops and used cardealers. Buyers can review car listings online or in person and participate in online auctions to bid for salvage cars. Our salvage car business generatesrevenues mainly from the transaction fees we charge buyers, ranging from 8% to 15% of the gross sale price of the salvage cars sold. We also provide otherservices such as towing and parking, for which we charge additional service fees. Dealer inventory financing (Easy Loan program) We provide short-term inventory financing to retail auto dealers for up to two months through our Easy Loan program. We collect information fromthe dealer to assess the dealer’s credit profile and make the credit decisions. If a dealer’s application is approved, we work with third-party financing partnersto provide funding to the dealer. Our Transaction Enablement and Service Capabilities Our nationwide transaction enablement and service capabilities comprise the follow components that provide crucial support to our online platform: · Delivery and fulfillment network. We believe we are the first company in China that has built a platform that enables a nationwide delivery andfulfillment network for used cars. We currently collaborate with over 100 third-party logistics partners covering over 400 cities at prefecturelevel or above. A used car sold through our platform can be delivered typically within a few business days using our delivery and fulfilmentnetwork. For each shipment order, logistics partners in our network submit bids for the order. The competitive bidding allows our customers tooptimize price and delivery speed. For our B2C cross-regional transactions, once a logistics partner is chosen for the shipment, we will typicallypay the shipping fees to the logistics partner, while for B2B cross-regional transactions, our customers will directly pay the shipping fees to thelogistics partner. For each shipment, our GPS devices track the location of the cars shipped in real time. We also optimize the order fulfillmentprocess by grouping orders that have the same regional or final destination to achieve economy of scale. · Title transfer. Title transfer of used cars in China typically involves de-registering a car with one owner and registering the car with anotherowner. As of December 31, 2018, we partnered with approximately 150 title transfer service providers to handle the entire title transfer processfor our customers to facilitate car purchases on our platform. · Warranty and repair services. To strengthen consumer trust in our platform, we certify the cars listed on our platform with our certification,Uxin Certified (), into “gold” and “silver” categories. Every Uxin Certified listing carries a 30-day return policy covering certainmajor damages caused by severe accidents provided that such damages exist as of the date of sale. In addition, we provide one-year or 20,000-kilometer warranty covering both maintenance and repair of 15 major structural components to cars certified as “gold”, and half-year or 10,000-kilometer warranty covering both maintenance and repair of 5 major structural components for cars certified as “silver”. We provide warranty toconsumers without charging any additional fees to the standard transaction facilitation fees. We also partner with over 300 car repair serviceproviders to assist our customers with car repair needs, including those covered by our warranty. · Insurance referral. As of December 31, 2018, we partnered with six insurance partners to refer users to their auto insurance solutions throughour platform. 61Table of Contents · Service centers. We currently have over 1,300 service centers operated by ourselves or our third-party local partners, covering more than 400cities at prefecture level or above in China to provide local, in-person assistance to our customers. We follow a disciplined and systematicexpansion process with respect to our new store openings. We select potential locations for our service centers based on various factors,including existing market competition, the size of potential customer base, population, car PARC, foot and vehicle traffic, local regulations oncross-regional title transfer and license plate registration, and economic condition. Starting from December 2018, we have also adopted afranchised model to complement our self-operated service centers in the effort to effectively expand our service centers across China. Inaddition, we had 5,567 sales consultants in service centers operated by ourselves as of December 31, 2018. Our sales consultants in the servicecenters assist consumers with selling or buying used cars, inspecting used cars in person or reviewing videos and reports generated by CheckAuto system, and arranging for signing and delivery, although specific services may differ across different service centers. Our sales consultantsin our service centers can also cross-sell other services on our platform to customers. · Regional transaction centers. Our seven regional transaction centers provide offline support to our 2B business. Cars for sale are parked at ourregional transaction centers, and buyers can visit our regional transaction centers to inspect cars in person before participating in onlineauctions. Regional transaction centers can also provide other services such as car inspection, title transfer, delivery and payment processing. · Call centers. Our call centers and customer service team handle consumers’ inquiries online, including the transaction process, financingoptions and other transaction related matters. Our professional in-house call center staff ensures prompt responses to customers’ inquiries andexpedites order processing. Technology We leverage sophisticated technology to provide a differentiated user experience and to improve our operations. Check Auto inspection system Our proprietary Check Auto system is an integrated, interactive vehicle inspection system that enables our inspection professionals to conduct acomprehensive examination of cars for listing on our platform. A significant portion of the inspection process is automated by our proprietary, state-of-the-arttechnology, including wearable digital glasses to record the inspection process, automatic diagnostics of car condition from video footage and imagerecognition technology that can automatically identify certain car conditions. As a result, Check Auto improves both inspection accuracy and efficiency. A mobile device serves as the hardware management and data collection terminal during each car inspection. Equipped with touch screen and voicecommand features, the mobile device is a highly interactive platform powered by our Check Auto inspection software. The mobile device is also connectedto multiple inspection hardware devices, including wearable digital glasses, the vehicle on-board diagnostics system and a coating thickness gauge. Ourinspection professionals follow the instructions prompted by the mobile device and interact with the software system through the touch screen and voicecommands during the inspection process. An inspection by Check Auto involves a standard procedure that covers more than 300 documented steps. The inspection process may be adjusteddepending on the brand and model of the car. After each inspection, our system automatically generates a comprehensive, standardized Check Auto report. Each condition report includesextensive information on the exterior and interior of the car, structure and engine condition, among many other characteristics. Key inspection points areindexed and marked in the comprehensive inspection videos, and consumers can easily navigate through the videos by selecting the inspection points thatthey are most interested in. 62Table of Contents In addition to data collected through our systems, we cooperate with a number of public and private third party services for supplemental dataincluded in our Check Auto condition reports, comprising details on each car’s accident and repair history, insurance claims and ownership records. As of December 31, 2018, we had obtained 10 patents in relation to vehicle inspection. Check Auto is also recognized and trusted by bothconsumers and businesses. For example, we have licensed the system to several top car manufacturers for their own car inspection needs Manhattan pricing engine Our AI- and data-driven Manhattan pricing engine evaluates each car’s condition and provides significant pricing insights. The Manhattan pricingengine also estimates the residual values of vehicles that enable many of our core services and we may adjust our estimates of residual values based on thelatest transaction data for used cars on our platform as well as external data including the latest price of related new cars. Our consumer auto loan facilitationservices rely on the estimate of residual values to decide whether to assume the guarantee risks of the loans facilitated through our platform. For example,such estimate helps us determine whether the value of car collateral is sufficient to cover the outstanding loan balance. Additionally, if the asking price of aused car is abnormally high compared to the fair value of the car produced by our Manhattan pricing engine, this may indicate that the buyer and the sellerare colluding to obtain high loan proceeds using a relatively low quality car. In our 2C business, we also rely on the output of the Manhattan pricing engineto help consumers assess whether listing prices are in line with fair market value to make informed buying decisions. Our platform has generated a wealth of data on user behavior, cars and transactions that empowers and continually improves the Manhattan pricingengine. Since 2016, our platform has facilitated approximately 1.8 million successful transactions and collected data on these transactions. We have alsocumulatively inspected and collected proprietary data on approximately 6.6 million cars. Sunny risk control system Our proprietary Sunny risk control system allows us to monitor, visualize and manage our guarantee risk exposure arising from our consumer autoloan facilitation services. Our Sunny risk control system gathers data from loan applicants and financing partners online to conduct comprehensive pre- and post-financingrisk control, including verifying transaction authenticity and assessing guarantee risk before financing, and monitoring loan performance and collateral afterfinancing, see “—Our 2C business—Guarantee risk control.” It also monitors the risk exposure of our platform using delinquency rates in real time andgenerates insights about our products and customers to help us effectively manage our guarantee risk exposure. Based on Sunny’s assessment of our riskexposure, we may decide not to facilitate certain types of auto loans in a local market or tighten our credit approval standards accordingly if we discoverabnormally high risk of default of a product in that market. Lingxi smart selection system Based on the plethora of data we have on our users’ browsing history, behavior and preferences, our Lingxi () smart selection system makespersonalized recommendations to users, making it more likely for them to find the car of their choice. In addition, users can answer a few simple questions inan interactive interface, such as purchasing budget and preferred car style, based on which we make personalized recommendations of cars that match eachuser’s preferences. We carefully design these questions based on hundreds of car parameters so that even novice used cars buyers can easily find the car suitedto their preferences. Virtual reality-enabled car viewing system To further enhance user experience, we introduced a virtual reality-enabled car view system in the second half of 2018, which comprises of VRfilming studio, automatic shooting system and back-end system. The VR viewing system enables us to capture consistent and high-resolution panorama carimages and display these images on our mobile apps and websites. Our virtual reality-enabled car viewing system enables our consumer to inspect everydetail of the car, such as small scratches and wheel parts, in high-resolution images and enables a smooth viewing experience. 63Table of Contents Marketing and Brand Promotion We focus our marketing and sales efforts on brand advertising and user acquisition. To build our brand awareness, we utilize mass market advertising, especially in locations with heavy car traffic. We also place ads in highly popularmedia content, such as sponsoring the movie Transformers: The Last Knight. In addition, we leverage social media campaigns to raise our brand awareness.Our marketing team, consisting of over 50 marketing professionals as of December 31, 2018, is dedicated to implementing our multi-channel marketingstrategy both online and offline. Our marketing strategy is highly effective. According to an industry survey in April 2018 commissioned by us and preparedby Ipsos, 68% of Chinese consumers named “Uxin” when asked about the used car industry without being provided with prompts specifically related to us.According to the China Used Car Consumption Market Survey conducted by the DCCI Internet Data Research Center in November 2018, we are the highestranking used-car brand for customer loyalty. For user acquisition, we have partnered with major search engines, online media channels and other internet portals to generate traffic to ourplatform. Our mobile apps are constantly ranked among the top in mobile app stores in used car e-commerce categories. We have also entered into a strategicpartnership with Taobao in December 2018, under which we have agreed to collaborate in the areas of B2C and B2B used car transactions, integrated supplychain, and used car loan facilitation. As part of the agreement, we have established an online used car shopping mall on Taobao Marketplace and placedentry points to our platform on Ali Used Cars and Xianyu, a platform dedicated to second-hand goods trading. Competition We operate in a highly competitive used car e-commerce market in every aspect of our business. We face intense competition from other used cartransaction platforms and from online used car listing services. Competition with other used car transaction platforms is primarily centered on the quality ofservice and customer acquisition. Competition with online used car listing services is primarily centered on attracting online traffic and gaining brandrecognition among consumers, auto dealers, and general internet users. Seasonality Seasonal fluctuations and industry cyclicality have affected, and are likely to continue to affect, our business. We generally generate less revenueduring Lunar New Year holidays in the first quarter of each year. The market for used cars is also affected by the release of new cars. In addition, spending onautomobiles in China has historically been cyclical, reflecting overall economic conditions as well as the budgeting and buying patterns of our consumersand businesses. Our rapid growth has lessened the impact of the seasonal fluctuations and cyclicality. However, we expect that the seasonal fluctuations andcyclicality will cause our quarterly and annual operating results to fluctuate. Facilities Our headquarters are located in Beijing. We currently have over 1,300 service centers operated by ourselves or our third-party local partners and 7regional transaction centers across China. As of the same date, our headquarters had an aggregate gross area of approximately over 15,000 square meters inBeijing, our service centers had an aggregate gross area of approximately 89,000 square meters across China, and our 7 regional transaction centers acrossChina had an aggregate gross area of approximately 370,000 square meters. We lease all the facilities to conduct our business. 64Table of Contents Intellectual Properties Our intellectual property contributes to our competitive advantage among used car e-commerce platforms in China. To protect our brand and otherintellectual property, we rely on a combination of patent, trademark, trade secret and copyright laws in China as well as imposing procedural and contractualconfidentiality and invention assignment obligations on our employees, contractors and others. As of December 31, 2018, we had obtained 64 patents, 701trademarks, 198 software copyrights, and 13 works copyrights, 166 domain names and have entered into confidentiality and proprietary rights agreementwith employees, consultants, contractors, and other business partners. Regulation This section sets forth a summary of the most significant rules and regulations that affect our business activities in China. Regulations on Company Establishment and Foreign Investment The establishment, operation and management of companies in China is governed by the PRC Company Law, as amended in 2005, 2013 and 2018.According to the PRC Company Law, companies established in the PRC are either limited liability companies or joint stock limited liability companies. ThePRC Company Law applies to both PRC domestic companies and foreign-invested companies. The establishment procedures, approval procedures, registeredcapital requirements, foreign exchange matters, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are regulated by theWholly Foreign-owned Enterprise Law of the PRC, as amended on September 3, 2016, and the Implementation Regulation of the Wholly Foreign-ownedEnterprise Law, as amended on February 19, 2014. In September 2016, the National People’s Congress Standing Committee published the Decision onRevising Four Laws including the Wholly Foreign-owned Enterprise Law of the People’s Republic of China, which changes the previous “filing or approval”procedure for foreign investments in China. Except for the restricted and prohibited industries listed under the Special Entry Management Measures(Negative List) for the Access of Foreign Investment (2018 version), or the 2018 Negative List, effective on July 28, 2018, foreign investments in businesssectors are therefore no longer subject to special administrative measures that require application for approval, instead, only a filing is required. Pursuant tothe Provisional Administrative Measures on Establishment and Modifications (Filing) for Foreign Investment Enterprises promulgated by MOFCOM onOctober 8, 2016 and amended on July 30, 2017 and June 29, 2018, respectively, establishment and changes of foreign investment enterprises not subject tothe approval under the special entry management measures shall be filed with the relevant commerce authorities. Additionally, the registration for a PRCCompany’s establishment, modification, and termination shall comply with the provision of Regulation of the People’s Republic of China on theAdministration of Company Registration which was amended by the State Council on February 6, 2016. The Guidance Catalog of Industries for Foreign Investment, or the Foreign Investment Catalog, promulgated by the National Development andReform Commission and the MOFCOM on June 28, 1995, and most recently amended on June 28, 2017 listed three categories with regard to foreigninvestment: “encouraged”, “restricted” and “prohibited.” Industries not listed in the catalog are generally deemed as falling into a fourth category“permitted” unless specifically restricted by other PRC laws. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged andpermitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to holdthe majority interests in such joint ventures. In addition, foreign investment in restricted category projects is subject to government approvals. Foreigninvestors are not allowed to invest in industries in the prohibited category. Industries not listed in the Catalogue are generally open to foreign investmentunless specifically restricted by other PRC regulations. The 2018 Negative List further expanded the scope of permitted industries by reducing the number ofindustries where restrictions of foreign investment exist. Foreign Investment Law On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which will take effect on January 1, 2020 and replacethree existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the WhollyForeign-owned Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRCregulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify thecorporate legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for theaccess to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition. 65Table of Contents According to the Foreign Investment Law, “foreign investment” refer to investment activities directly or indirectly conducted by one or more naturalpersons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investmentactivities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprisewithin China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) aforeign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided bylaws, administrative regulations, or the State Council. According to the Foreign Investment Law, the State Council will publish or approve to publish a catalogue for special administrative measures, orthe “negative list.” The Foreign Investment Law grants national treatment to foreign-invested entities, except for those foreign-invested entities that operatein industries deemed to be either “restricted” or “prohibited” in the “negative list”. Because the “negative list” has yet to be published, it is unclear whether itwill differ from the current 2018 Negative List. The Foreign Investment Law provides that foreign investors shall not invest in the “prohibited” industries,and shall meet the market entry conditions stipulated under the “negative list” for making investment in “restricted” industries. Furthermore, the Foreign Investment Law provides that foreign-invested enterprises established according to the existing laws regulating foreigninvestment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law. In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC,including, among others, that local governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are allowed to issuestocks and corporate bonds; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensationshall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer isprohibited; and the capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity orcompensation legally obtained, or proceeds received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMBor a foreign currency. Also, foreign investors or the foreign investment enterprise should be imposed legal liabilities for failing to report investmentinformation in accordance with the requirements. Regulations on Value-Added Telecommunications Services China’s telecommunication related businesses (including internet business) are still at an early stage of development, the laws and regulations ofwhich still remain subject to many uncertainties. On September 25, 2000, the Telecommunications Regulations of the People’s Republic of China, or theTelecom Regulation, was issued by the PRC State Council, which was amended and became effective on February 6, 2016, as the primary governing law ontelecommunication services by PRC companies. The Telecom Regulation draws a distinction between “basic telecommunication services” and “value-addedtelecommunication services.” The Catalog of Telecommunications Business, or the Telecommunication Catalog, was issued as an appendix to the TelecomRegulations to categorize telecommunications services as basic or value-added, and information services via public communication networks such as fixednetworks, mobile networks and Internet are classified as value-added telecommunications services. According to the Telecommunication Catalog, value-added telecommunication services include online data processing and transaction processing business (operating e-commerce business), internet informationservices business and other value-added telecommunication services. 66Table of Contents On March 1, 2009, the Ministry of Industry and Information Technology, or the MIIT, issued the Administrative Measures for TelecommunicationsBusiness Operating Permit, or the Telecom Permit Measures, which took effect on April 10, 2009. The Telecom Permit Measures were later amended onJuly 3, 2017 and the amendment took effect on September 1, 2017. The Telecom Permit Measures confirm that there are two types of telecom operatinglicenses for operators in China, namely, licenses for basic telecommunications services and licenses for value-added telecommunications services, or theVATS License. The license granted will set out the operation scope of the enterprise which details the permitted activities of such enterprise. An approvedtelecommunication services operator shall conduct its business in accordance with the specifications listed in its VATS License. In addition, a VATS Licenseholder is required to obtain approval from the original permit-issuing authority in respect of any change to its shareholders. Regulation Relating to Internet Information Services On September 25, 2000, the State Council promulgated the Administrative Measures on Internet Information Services, or the Internet Measures,which were later amended in January 8, 2011. Under the Internet Measures, a VATS License shall be obtained before conducting profitable internetinformation services in the PRC, and a filing requirement shall be satisfied before conducting non-profitable internet information service. The provision ofinformation services through mobile apps is subject to the PRC laws and regulations governing Internet information services. In addition, on June 28, 2016, the State Internet Information Office promulgated the Administrative Provisions on Mobile Internet ApplicationInformation Services, or the Mobile Application Administrative Provisions, to strengthen the regulation of the mobile apps information services. Pursuant tothe Mobile Application Administrative Provisions, an internet application program provider must verify each user’s mobile phone number and other identityinformation under the principle of mandatory real name registration at the back-office end and voluntary real name display at the front-office end. An internetapplication program provider must not enable functions that can collect a user’s geographical location information, access user’s contact list, activate thecamera or recorder of the user’s mobile smart device or other functions irrelevant to its services, nor is it allowed to conduct bundle installations of irrelevantapplication programs, unless it has clearly indicated to the user and obtained the user’s consent on such functions and application programs. Furthermore, inDecember 16, 2016, the MIIT promulgated the Interim Measures on the Administration of Pre-Installation and Distribution of Applications for Mobile SmartTerminals, or the Mobile Application Interim Measures, which took effect on July 1, 2017. The Mobile Application Interim Measures require, among others,that internet information service providers must ensure that a mobile apps, as well as its ancillary resource files, configuration files and user data can beuninstalled by a user easily, unless it is a basic function software, which refers to a software that supports the normal functioning of hardware and operatingsystem of a mobile smart device. The content of the internet information is highly regulated in China and pursuant to the Internet Measures, the PRC government may shut down thewebsites of internet information providers and revoke their VATS Licenses (for profitable Internet information services) if they produce, reproduce,disseminate or broadcast internet content that contains content that is prohibited by law or administrative regulations. Internet information services operatorsare also required to monitor their websites. They may not post or disseminate any content that falls within the prohibited categories, and must remove anysuch content from their websites, save the relevant records and make a report to the relevant governmental authorities. Additionally, as the internetinformation service providers, under the PRC Tort Liability Law, which became effective in July 2010, they shall bear tortious liabilities in the event theyinfringe upon other person’s rights and interests due to providing wrong or inaccurate content through the internet. Where an internet service providerconducts tortious acts through internet services, the infringed person has the right to request the internet service provider take necessary actions such asdeleting contents, screening and de-linking. Failing to take necessary actions after being informed, the internet service provider will be subject to itsliabilities with regard to the additional damages incurred. Where an internet service provider knows that an internet user is infringing upon other persons’rights and interests through its internet service but fails to take necessary actions, it is jointly and severally liable with the internet user. 67Table of Contents Regulation Relating to E-Commerce Online data processing and transaction processing business (operating e-commerce business) is a value-added telecommunication service, and e-commerce operation shall be required to obtain VATS License. On January 26, 2014, the State Administration for Industry and Commerce, or the SAIC, promulgated the Administrative Measures for OnlineTrading, which strengthen the protection of consumers and impose stringent requirements and obligations on online business operators and third-partyonline marketplace operators. Online business operators and third-party online marketplace operators are prohibited from collecting any information onconsumers and business operators, or disclosing, selling or providing any such information to any third party, or sending commercial electronic messages toconsumers without their consent. Fictitious transactions, deletion of adverse comments and technical attacks on competitors’ websites are prohibited as well.In addition, third-party online marketplace operators are required to examine and verify the identifications of the online business operators and set up andretain relevant records for at least two years. Moreover, any third-party online marketplace operator that simultaneously engages in online trading forproducts and services should clearly distinguish itself from other online business operators on its marketplace platform. On August 31, 2018, the Standing Committee of the National People’s Congress promulgated the PRC E-Commerce Law, or the E-Commerce Law,which became effective on January 1, 2019. The E-Commerce Law establishes the regulatory framework for the e-commerce sector in the PRC for the firsttime by laying out certain requirements on e-commerce operators, including e-commerce platform operators like us. Pursuant to the E-Commerce Law, e-commerce platform operators are required to (i) take necessary actions or report to relevant competent government authorities when such operators notice anyillegal production or services provided by merchants on the e-commerce platforms; (ii) verify the identity of the business operators on the platforms;(iii) provide identity and tax related information of merchants to local branches of State Administration for Market Regulation and relevant tax authorities; or(iv) record and preserve goods and service information and transaction information on the e-commerce platform. The E-Commerce Law also specificallystipulates that e-commerce platform operators shall not impose unreasonable restrictions or conditions on the transactions of their business operators on theplatforms. According to the E-Commerce Law, failures to comply with these requirements may subject the e-commerce platform operators to administrativepenalties, fines and/or suspension of business. In addition, for goods and services provided via e-commerce platforms and pertinent to the life and health ofconsumers, e-commerce platform operators shall bear relevant responsibilities, which may give rise to civil or criminal liabilities if the consumers suffereddamages due to the e-commerce platform operators’ failure to duly verify the qualifications or the licenses of the business operators on the platforms or toduly perform their safety protection obligations as required by the E-Commerce Law. Regulation Relating to Foreign Investment Restriction on Value-Added Telecommunications Services Pursuant to the Provisions on Administration of Foreign Invested Telecommunications Enterprises, or the FITE Regulation, promulgated by theState Council on December 11, 2001 and amended on September 10, 2008 and February 6, 2016, except as otherwise provided by MIIT, the ultimate foreignequity ownership in a value-added telecommunications services provider shall not exceed 50%. Pursuant to the Circular of Ministry of Industry andInformation Technology concerning Lifting Restrictions on the Proportion of Foreign Equity in Online Data Processing and Transaction Processing Business(Operating E-commerce Business) promulgated by the MIIT on June 19, 2015, the online data processing and transaction processing businesses (operating e-commerce business) could be 100% owned by foreign investors. Moreover, for a foreign investor to acquire any equity interest in a value-addedtelecommunications business in China, it must satisfy a number of stringent performance and operational experience requirements, including demonstratinggood track records and experience in operating value-added telecommunications business overseas. Foreign investors that meet these requirements mustobtain approvals from the MIIT and MOFCOM or their authorized local counterparts, which retain considerable discretion in granting approvals. Pursuant topublicly available information, the PRC government has issued telecommunications business operating licenses to Sino-foreign joint ventures in verylimited circumstances. The 2018 Negative List also imposes the 50% restrictions on foreign ownership in value-added telecommunications business exceptfor operating e-commerce business. In addition, the services for releasing information by the public through internet are listed as businesses that areprohibited for foreign investors under 2018 Negative List. 68Table of Contents On July 13, 2006, the MIIT issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-addedTelecommunications Business, or the MIIT Circular, which requires foreign investors to set up a value-added telecommunications business foreign-investedenterprise and obtain a VATS License to conduct relevant value-added telecommunications business in China. Under the MIIT Circular, a domestic companythat holds a VATS License is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance,including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore,the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local VATS License holderor its shareholder. The MIIT Circular further requires each VATS License holder to have the necessary facilities for its approved business operations and tomaintain such facilities in the regions covered by its license and all value-added telecommunications services providers shall improve network andinformation security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety. Regulations on Information Security and Privacy Protection Internet content in China is regulated and restricted from a state security standpoint. On December 28, 2000, the Standing Committee of the PRCNational People’s Congress enacted the Decisions on Maintaining Internet Security, later amended on August 27, 2009, which subject violators to criminalpunishment in China for any effort to: (i) use the internet to market fake and substandard products or carry out false publicity for any commodity or service;(ii) use the internet for the purpose of damaging the commercial goodwill and product reputation of any other person; (iii) use the internet for the purpose ofinfringing on the intellectual property of any person; (iv) use the internet for the purpose of fabricating and spreading false information that affects thetrading of securities and futures or otherwise jeopardizes the financial order; or (v) create any pornographic website or webpage on the internet, provide linksto pornographic websites, or disseminate pornographic books and magazines, movies, audiovisual products, or images. The Ministry of Public Security haspromulgated measures that prohibit use of the Internet in ways which, among other things, would result in a leakage of state secrets or a spread of sociallydestabilizing content, and require internet service providers to take proper measures including anti-virus, data back-up and other related measures, to keeprecords of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users)for at least 60 days, and to detect illegal information, stop transmission of such information, and keep relevant records. If an internet information serviceprovider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites. PRC governmental authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure.In December 28, 2012, the Standing Committee of the PRC National People’s Congress promulgated the Decision on Strengthening Network InformationProtection to enhance the legal protection of information security and privacy on the internet. In July 2013, the MIIT promulgated the Provisions onProtection of Personal Information of Telecommunication and Internet Users to regulate the collection and use of users’ personal information in the provisionof telecommunication services and internet information services in China. Telecommunication business operators and internet service providers are requiredto establish its own rules for collecting and use of users’ information and cannot collect or use users’ information without users’ consent. Telecommunicationbusiness operators and internet service providers are prohibited from disclosing, tampering with, damaging, selling or illegally providing others with,collected personal information. On November 7, 2016, Standing Committee of the PRC National People’s Congress published the Cyber Security Law of the PRC, which took effecton June 1, 2017 and requires network operators to perform certain functions related to cyber security protection and the strengthening of network informationmanagement. For instance, under the Cyber Security Law, network operators of key information infrastructure shall store within the territory of the PRC allthe personal information and important data collected and produced within the territory of PRC and their purchase of network products and services that mayaffect national securities shall be subject to national cybersecurity review. On May 2, 2017, the Cyberspace Administration of China issued a trial version ofthe Measures for the Security Review of Network Products and Services (Trial), which took effect on June 1, 2017, to provide for more detailedrules regarding cybersecurity review requirements. 69Table of Contents Regulations on Auction Business On April 24, 2015, Auction Law of the People’s Republic of China was promulgated by the Standing Committee of the National People’s Congressfor the purpose of regulating and administrating the business operation of auction. Pursuant to the Auction Law, “auction” refers to a way of selling particulargoods or property rights to the bidder who offers the highest price in the form of public bidding. According to the Measures for the Administration of theCirculation of Used Cars promulgated by the Ministry of Commerce and three other ministries on August 29, 2005 and amended on September 14, 2017,“used car auction” refers to the business activities whereby a used car auction enterprise transfers a used car to a bidder that offers the highest price throughpublic bidding.” According to The Specifications for Used Cars Transaction promulgated by the Ministry of Commerce on March 24, 2006, where an auctionis conducted through the internet, the color photo of the car and information of auctioned car shall be published on internet. The publication period shall notbe less than seven days. An enterprise engaging in activities of auction should undergo the review and approval procedure with relevant governmentauthority and obtain the license for auction business. Any entity engaging in the auction business without the license may be subject to enforcement action,including orders issued by the relevant regulatory authorities to cease the auction business, confiscation of any illegal gains, or imposition of fines. Regulations on the Circulation of Used Cars On August 29, 2005, the Measures for the Administration of the Circulation of Used Cars, or the Used Cars Measures, were promulgated by theMinistry of Commerce, or the MOFCOM, the Ministry of Public Security, the SAIC, and the State Administration of Tax, or the SAT, for the purpose ofintensifying the administration of the circulation of used cars, regulating the business operations of used cars, guaranteeing the legitimate interests and rightsof both parties to transactions of used cars and promoting the sound development of the circulation of used cars. The Used Cars Measures stipulate that anarchival filing system for the operators of used car markets and operators of used cars shall be established. The operators of used car markets and operators ofused cars that have handled the registration in the administrative department of industry and commerce according to law and obtained the business licenseshall go to the administrative department of commerce at the provincial level for archival filing within 2 months as of obtaining their business license. Theadministrative department of commerce at the provincial level shall report the information on the archival filing of the operators of used car markets as wellas operational subjects of used cars to the administrative department of commerce of the State Council on a periodic base. The Used Cars Measures furtherstipulate that (i) a business operator of a used car market, a retail enterprise and brokerage entity of used cars shall possess the qualification of an enterpriselegal-person and shall complete the registration procedures with the administrative department of industry and commerce, and (ii) the establishment of anauction enterprise of used cars (including a foreign-funded auction enterprise of used cars) shall comply with the relevant provisions of the Auction Law ofthe People’s Republic of China and the Measures for the Administration of Auction, and shall be handled according to the procedures as prescribed by theMeasures for the Administration of Auction, which means that an auction enterprise of used cars shall obtain an Approval License for Operation of Auctionbefore it engages in auction of used cars. On March 24, 2006, the MOFCOM promulgated the Specifications for Used Car Trade, or the Specifications, whichset forth detailed criteria and requirements for the purchase, sale, dealing, auction, evaluation, trading and post-sale services in respect of used car. Regulations on Financing Lease In September 18, 2013, MOFCOM issued the Administration Measures of Supervision on Financing Lease Enterprises, or the Leasing Measures, toregulate and administer the business operations of financing lease enterprises. According to the Leasing Measures, financing lease enterprises are allowed tocarry out financing lease business in such forms as direct lease, sublease, sale-and-lease-back, leveraged lease, entrusted lease and joint lease in accordancewith the provisions of relevant laws, regulations and rules. However, the Leasing Measures prohibit financing lease enterprises from engaging in financialbusiness such as accepting deposits, providing loans or entrusted loans. Without the approval from relevant authorities, financing lease enterprises shall notengage in inter-bank borrowing and other businesses. In addition, financing lease enterprises are prohibited from carrying out illegal fund-raising activities inthe name of financing lease. The Leasing Measures require financing lease enterprises to establish and improve their financial and internal risk controlsystems, and a financing lease enterprise’s risk assets shall not exceed ten times of its total net assets. Risk assets generally refer to the adjusted total assets ofa financing lease enterprise excluding cash, bank deposits, sovereign bonds and entrusted leasing assets. 70Table of Contents The main regulation governing foreign investment in the PRC financing lease industry included the Administrative Measures on Foreign-InvestedLease Industry, as amended on October 28, 2015. However, it has recently been repealed by MOFCOM on February 22, 2018. The above measures requirethat foreign investors investing directly in the PRC financing lease industry must have total assets of no less than US$5 million. MOFCOM is the competentadministrative authority in charge of the foreign-invested lease industry and is also responsible for the examination and approval of such business. A foreign-invested financing lease enterprise may undertake the following business: (i) the financing lease business; (ii) the lease business; (iii) the purchase of leasedproperties from onshore and offshore; (iv) the disposal of scrap value of and maintenance of leased properties; (v) the consultancy and guaranty businessrelating to lease transactions; and (vi) other business approved by the examination and approval department. In addition, a foreign-invested financing leaseenterprise shall meet the following requirements: (i) have corresponding professionals, with its senior management personnel having relevant professionalqualifications and experience of at least three years, (ii) the operating period of a foreign-invested financing lease enterprise established in the form of limitedliability company shall not exceed thirty years. The risk assets of a foreign-invested financing lease enterprise shall not exceed ten times of its total net assets. Regulations on Motor Vehicle Maintenance On June 24, 2005, the MOT promulgated the Administration of Motor Vehicle Maintenance, which was amended on August 8, 2015 and April 19,2016, pursuant to which, a motor vehicle maintenance operator shall further apply to the road transport administration for a motor vehicle maintenanceoperation license after obtaining the corresponding business license issued by the administrative department for industry and commerce. “Motor vehiclemaintenance” including, business activities of maintenance, repair and maintenance aids as carried out with maintaining or recovering the technical state andnormal functions of motor vehicles and extending the serving term thereof as operational tasks. The operational business of automobile vehicle maintenanceis classified into operational business of Grades I, II and III in light of their operational items and serving capabilities. Anyone that has obtained the license ofGrade I and Grade II may undertake entire automobile repair, assembly repair, entire automobile maintenance, minor repair, maintenance aids, specific repairand the examination work after the completion of maintenance of corresponding vehicle types. Anyone hat has obtained the license of Grade III mayundertake general minor repair and special repair, such as repair and maintenance of engines, vehicle bodies and electric systems. Anyone failing to obtain abusiness license for motor vehicle maintenance and unlawfully engaging in the motor vehicle maintenance shall be ordered to cease the operation by theadministrative institution of road transportation at or above the county level; in the case of any illegal proceeds, the illegal proceeds shall be confiscated anda fine of 2 up to 10 times of the illegal proceeds shall be imposed; where there is no illegal proceeds or where the illegal proceeds is less than RMB10,000, afine of RMB20,000 or up to RMB50,000 shall be imposed; where the violation constitutes a crime, the violator shall be subject to criminal liabilities. Regulations on Advertisement The PRC government regulates advertising principally through the SAIC. The PRC Advertising Law, or the Advertising Law, as amended inApril 2015 and on October 26, 2018, outlines the regulatory framework for the advertising industry. The Advertising Law stipulates that advertisements shallnot contain any false or misleading content or defraud or mislead consumers. Any advertisement that defrauds or misleads consumers with any false ormisleading content is considered a false advertisement. An advertiser shall be responsible for the veracity of contents of advertisement. Violation of theseregulations may result in penalties calculated on the basis of advertising expenses. Regulations on Online Consumer Finance The regulation on online consumer finance industry in China is still under development. In December 2017, the Internet Financial RisksRectification Office and the P2P Online Lending Risks Rectification Office jointly issued the Circular 141, outlining general requirements on the “cash loan”business conducted by network microcredit companies, banking financial institutions and online lending information intermediaries. The Circular 141specifies the features of “cash loans” as not relying on consumption scenarios, with no specified use of loan proceeds, no qualification requirement oncustomers and unsecured etc. The Circular 141 further requires that financial institutions that participate in the “cash loan” business not to accept any creditenhancement services or other similar services from third parties without qualification to provide guarantee, and third party cash loan facilitators areprohibited from directly charging fees from borrowers. However, there is no clear definition of “cash loan” set forth in the Circular 141. 71Table of Contents Regulations on Intellectual Property Copyright and Software Products The National People’s Congress adopted the Copyright Law on September 7, 1990 and amended it on October 27, 2001 and February 26, 2010,respectively. The amended Copyright Law extends copyright protection to internet activities, products disseminated over the internet and software products.In addition, there is a voluntary registration system administered by the China Copyright Protection Center. In order to further implement the Computer Software Protection Regulations promulgated by the State Council on December 20, 2001 and amendedon January 30, 2013, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, which apply tosoftware copyright registration, license contract registration and transfer contract registration. According to the Copyright Law, an infringer will be subject to various civil liabilities, which include cessation of the infringement and apologizingto and compensating the actual loss suffered by the copyright owner. If the actual loss of the copyright owner is difficult to calculate, the income received bythe infringer as a result of the infringement will be deemed as the actual loss or if such illegal income is also difficult to calculate, the court can decide theamount of the actual loss up to RMB500,000 (US$72,722). Trademarks Trademarks are protected by the PRC Trademark Law adopted in August 23, 1982 and subsequently amended in February 22, 1993, October 27,2001 and August 30, 2013 as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council in August 3, 2002 andamended on April 29, 2014. The Trademark Office under the SAIC handles trademark registrations and grants a term of ten years to registered trademarks andanother ten years if requested upon expiry of the first or any renewed ten-year term. Trademark license agreements must be filed with the Trademark Office forrecord. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration hasbeen made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use onthe same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for theregistration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has alreadybeen used by another party and has already gained a “sufficient degree of reputation” through such party’s use. After receiving an application, the PRCTrademark Office will make a public announcement if the relevant trademark passes the preliminary examination. During the three months after this publicannouncement, any person entitled to prior rights and any interested party may file an objection against the trademark. The PRC Trademark Office’sdecisions on rejection, objection or cancellation of an application may be appealed to the PRC Trademark Review and Adjudication Board, whose decisionmay be further appealed through judicial proceedings. If no objection is filed within three months after the public announcement or if the objection has beenoverruled, the PRC Trademark Office will approve the registration and issue a registration certificate, at which point the trademark is deemed to be registeredand will be effective for a renewable ten-year period, unless otherwise revoked. Trademark license agreements should be filed with the Trademark Office or itsregional offices. Domain Names Internet domain name registration and related matters are primarily regulated by the Measures on Administration of Domain Names for the ChineseInternet , issued by MIIT on November 5, 2004 and effective as of December 20, 2004 which was replaced by the Measures on Administration of InternetDomain Names issued by MIIT as of November 1, 2017, and the Implementing Rules on Registration of Domain Names issued by China Internet NetworkInformation Center on May 28, 2012, which became effective on May 29, 2012. Domain name registrations are handled through domain name serviceagencies established under the relevant regulations, and the applicants become domain name holders upon successful registration. 72Table of Contents Patent On March 12, 1984, the Standing Committee of the National People’s Congress promulgated the Patent Law, which was amended in September 4,1992, August 25, 2000 and December 27, 2008. On June 15, 2001, the State Council promulgated the Implementation Regulation for the Patent Law, whichwas amended in January 9, 2010. According to these laws and regulations, the State Intellectual Property Office is responsible for administering patents in thePRC. The Chinese patent system adopts a “first to file” principle, which means that where more than one person files a patent application for the sameinvention, a patent will be granted to the person who filed the application first. To be patentable, invention or utility models must meet three conditions:novelty, inventiveness and practical applicability. A patent is valid for 20 years in the case of an invention and 10 years in the case of utility models anddesigns. A third-party user must obtain consent or a proper license from the patent owner to use the patent. Otherwise, third-party use constitutes aninfringement of patent rights. As of December 31, 2018, we had been issued 64 patents in the PRC. Regulations Relating to Foreign Exchange Regulations on Foreign Currency Exchange Pursuant to the Foreign Exchange Administration Regulations, as amended on August 5, 2008, Renminbi is freely convertible for current accountitems, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items,such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from StateAdministration of Foreign Exchange, or the SAFE, and prior registration with SAFE is made. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement ofCapital of Foreign invested Enterprises, or the SAFE Circular 19, in replacement of the Circular on the Relevant Operating Issues Concerning theImprovement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142. SAFEfurther promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange SettlementManagement Policy of Capital Account, or the SAFE Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of Circular19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registeredcapital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans topersons other than affiliates unless otherwise permitted under its business scope. Violations of SAFE Circular 19 or SAFE Circular 16 could result inadministrative penalties. From 2012, SAFE has promulgated several circulars to substantially amend and simplify the current foreign exchange procedure. Pursuant to thesecirculars, the opening of various special purpose foreign exchange accounts, the reinvestment of RMB proceeds by foreign investors in the PRC andremittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verificationof SAFE. In addition, domestic companies are allowed to provide cross-border loans not only to their offshore subsidiaries, but also to their offshore parentsand affiliates. SAFE also promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic DirectInvestment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches overdirect investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to thedirect investment in the PRC based on the registration information provided by SAFE and its branches. In February 2015, SAFE promulgated the Notice onFurther Simplifying and Improving the Foreign Exchange Management Policies for Direct Investment, or the SAFE Circular 13, which took effect on June 1,2015. SAFE Circular 13 delegates the power to enforce the foreign exchange registration in connection with inbound and outbound direct investments underrelevant SAFE rules from local branches of SAFE to banks, thereby further simplifying the foreign exchange registration procedures for inbound andoutbound direct investments. 73Table of Contents On January 26, 2017, SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign ExchangeControl, or the SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities tooffshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the originalversion of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses beforeremitting the profits. Moreover, pursuant to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilizationarrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outboundinvestment. Regulations on Dividend Distribution The principal regulations governing distribution of dividends of foreign-invested enterprises include the PRC Company Law, the Foreign InvestedEnterprise Law, and the Implementation Rules of the Foreign Invested Enterprise Law. Under these laws and regulations, wholly foreign-owned enterprises inChina may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with China accounting standards and regulations.In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fundcertain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at theirdiscretion, allocate a portion of their after-tax profits based on China accounting standards to staff welfare and bonus funds. These reserves are notdistributable as cash dividends. Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment throughSpecial Purpose Vehicles, or the SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connectionwith their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents orentities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information(including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares,or mergers or divisions. SAFE Circular 37 was issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging inFinancing and Roundtrip Investments via Overseas Special Purpose Vehicles issued by SAFE in October 2005. SAFE further enacted SAFE Circular 13,which allows PRC residents or entities to register with qualified banks in connection with their establishment or control of an offshore entity established forthe purpose of overseas investment or financing. However, remedial registration applications made by PRC residents that previously failed to comply withthe SAFE Circular 37 continue to fall under the jurisdiction of the relevant local branch of SAFE. In the event that a PRC shareholder holding interests in aspecial purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited fromdistributing profits to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may berestricted in its ability to contribute additional capital into its PRC subsidiary. Moreover, failure to comply with the various SAFE registration requirementsdescribed above could result in liability under PRC law for evasion of foreign exchange controls. Regulations on Stock Incentive Plans In February 2012, SAFE promulgated the Notice on Foreign Exchange Administration of PRC Residents Participating in Share Incentive Plans ofOffshore Listed Companies, or the Stock Option Rules, replacing the previous rules issued by SAFE in March 2007. Under the Stock Option Rules and otherrelevant rules and regulations, domestic individuals, which means the PRC residents and non-PRC citizens residing in China for a continuous period of notless than one year, subject to a few exceptions, who participate in a stock incentive plan in an overseas publicly-listed company are required to register withSAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRCagent, which could be a PRC subsidiary of the overseas publicly-listed company or another qualified institution selected by the PRC subsidiary, to conductthe SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseasentrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fundtransfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to thestock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. The PRC agents must, on behalf of the PRC residents whohave the right to exercise the employee share options, apply to SAFE or its local branches for an annual quota for the payment of foreign currencies inconnection with the PRC residents’ exercise of the employee share options. The foreign exchange proceeds received by the PRC residents from the sale ofshares under the stock incentive plans granted and dividends distributed by the overseas listed companies must be remitted into the bank accounts in thePRC opened by the PRC agents before distribution to such PRC residents. In addition, SAFE Circular 37 provides that PRC residents who participate in ashare incentive plan of an overseas unlisted special purpose company may register with SAFE or its local branches before exercising rights. 74Table of Contents Regulations Relating to Tax Enterprise Income Tax Under the Enterprise Income Tax Law of the PRC, or the EIT Law, which became effective on January 1, 2008 and was subsequently amended onFebruary 24, 2017 and December 29, 2018, and its implementing rules, enterprises are classified as resident enterprises and non-resident enterprises. PRCresident enterprises typically pay an enterprise income tax at the rate of 25% while non-PRC resident enterprises without any branches in the PRC should payan enterprise income tax in connection with their income from the PRC at the tax rate of 10%. An enterprise established outside of the PRC with its “de factomanagement bodies” located within the PRC is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a PRC domesticenterprise for enterprise income tax purposes. The implementing rules of the EIT Law define a de facto management body as a managing body that in practiceexercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.Enterprises qualified as “High and New Technology Enterprises” are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory taxrate. The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. The EIT Law and the implementation rules provide that an income tax rate of 10% should normally be applicable to dividends payable to investorsthat are “non-resident enterprises,” and gains derived by such investors, which (a) do not have an establishment or place of business in the PRC or (b) have anestablishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business to the extentsuch dividends and gains are derived from sources within the PRC. Such income tax on the dividends may be reduced pursuant to a tax treaty between Chinaand other jurisdictions. Pursuant to the Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidanceof Double Taxation on Income, or the Double Tax Avoidance Arrangement, and other applicable PRC laws, if a Hong Kong resident enterprise is determinedby the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and otherapplicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%upon receiving approval from in-charge tax authority. However, based on the Notice on Certain Issues with Respect to the Enforcement of DividendProvisions in Tax Treaties issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefitsfrom such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential taxtreatment; and based on the Announcement on Relevant Issues Concerning the “Beneficial Owners” in Tax Treaties issued on February 3, 2018 by the SATand effective from April 1, 2018, which replaces the Notice on the Interpretation and Recognition of Beneficial Owners in Tax Treaties and theAnnouncement on the Recognition of Beneficial Owners in Tax Treaties by the SAT, comprehensive analysis based on the stipulated factor therein andactual circumstances shall be adopted when recognizing the “beneficial owner” and agents and designated wire beneficiaries are specifically excluded frombeing recognized as “beneficial owners”. 75Table of Contents Value-added Tax Pursuant to applicable PRC regulations promulgated by the Ministry of Finance and the SAT, any entity or individual conducting business in theservice industry is required to pay a valued-added tax, or VAT, with respect to revenues derived from the provision of services. A taxpayer is allowed to offsetthe qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided. M&A Rules and Overseas Listings On August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission, or the CSRC, adopted the Regulations onMergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006 and was amended on June 22, 2009.Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or subscribe the increased capital of adomestic company, and thus changing the nature of the domestic company into a foreign-invested enterprise; or when the foreign investors establish aforeign-invested enterprise in the PRC, purchase the assets of a domestic company and operate the assets; or when the foreign investors purchase the asset of adomestic company, establish a foreign-invested enterprise by injecting such assets and operate the assets. The M&A Rules purport, among other things, torequire offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRCcompanies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On December 26, 2017, the NDRC adopted the Administrative Measures for Enterprises’ Overseas Investment, or the Overseas Investment Rules,which will become effective on March 1, 2018. The New M&A Rules provides that, for local enterprises (enterprises that are not managed by the stategovernment), if the amount of investment made by the Chinese investors is less than US$300 million, and the target project is non-sensitive, then theoverseas investment project will require online filing with the local branch of the NDRC where the enterprise itself is registered. And “overseas investment”shall mean activities where an PRC enterprise, directly or through an overseas enterprise controlled by it, acquires overseas any ownership, right of control,right of business management, or other relevant rights and interests, by contributing assets or rights and interests, providing financing and/or guarantee, orany other means. Employment Laws Pursuant to the PRC Labor Law, the PRC Labor Contract Law and the Implementing Regulations of the Employment Contracts Law, laborrelationships between employers and employees must be executed in written form. Wages may not be lower than the local minimum wage. Employers mustestablish a system for labor safety and sanitation, strictly abide by state standards and provide relevant education to its employees. Employees are alsorequired to work in safe and sanitary conditions. Under PRC laws, rules and regulations, including the Social Insurance Law, the Interim Regulations on the Collection and Payment of SocialSecurity Funds and the Regulations on the Administration of Housing Accumulation Funds, employers are required to contribute, on behalf of theiremployees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance,occupational injury insurance, maternity leave insurance and housing accumulation funds. These payments are made to local administrative authorities andany employer who fails to contribute may be fined and ordered to pay the deficit amount. Regulations on Leasing Pursuant to the Law on Administration of Urban Real Estate which took effect in January 1995 with the latest amendment in August 2009, lessorsand lessees are required to enter into a written lease contract, containing such provisions as the term of the lease, the use of the premises, liability for rent andrepair, and other rights and obligations of both parties. Both lessor and lessee are also required to register the lease with the real estate administrationauthorities. Pursuant to implementing rules stipulated by certain provinces or cities, such as Tianjin, if the lessor and lessee fail to go through the registrationprocedures, both lessor and lessee may be subject to fines. 76Table of Contents According to the PRC Contract Law which took effect in October 1999, the lessee may sublease the leased premises to a third party, subject to theconsent of the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. The lessor is entitled toterminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition, if the lessor transfers the premises, the leasecontract between the lessee and the lessor should still remain valid. Pursuant to the PRC Property Law which took effect in October 2007, if a mortgagorleases the mortgaged property before the mortgage contract is executed, the previously established leasehold interest should not be affected by thesubsequent mortgage, but where a mortgagor leases the mortgaged property after the creation and registration of the mortgage interest, the leasehold interestshould be subordinated to the registered mortgage. In addition, the Supreme People’s Court issued the Interpretation on Several Issues with respect to the Specific Application of Law in the Trial ofDisputes over Partitioned Ownership of Buildings, pursuant to which, if the landlord uses his property, which is designated for residential use, for businesspurposes without prior consents of other owners whose interests are involved, the other owners may request for removing impairment, eliminating danger,reinstatement or compensation for losses. Regulations on Unfair Competition On April 11, 2017, the Standing Committee of the National People’s Congress amended the Anti-Unfair Competition Law of the People’s Republicof China, or the Anti-Unfair Competition Law, which became effective on January 1, 2018. Pursuant to the Anti-Unfair Competition Law, a business operator shall not conduct any false or misleading commercial publicity in respect of theperformance, functions, quality, sales, user reviews, and honors received of its commodities, in order to defraud or mislead consumers. A business operatorpublishing any false advertisements in violation of this provision shall be punished in accordance with the Advertising Law of the People’s Republic ofChina. The Anti-Unfair Competition Law also stipulated that a business operator engaging in production or distribution activities online shall abide by theprovisions of the Anti-Unfair Competition Law. No business operator may, by technical means to affect users’ options, among others, commit the acts ofinterfering with or sabotaging the normal operation of online products or services legally provided by another business operator. In addition, according to the Anti-Unfair Competition Law, a business operator is prohibited from any of the following unfair activities: i)committing act of confusion to mislead a person into believing that a commodity is one of another person or has a particular connection with another person;ii) seeking transaction opportunities or competitive edges by bribing relevant entities or individuals with property or by any other means; iii) infringing tradesecrets; iv) premium campaign violating the provision of the Anti-Unfair Competition Law; and v) fabricating or disseminating false or misleadinginformation to damage the goodwill or product reputation of a competitor. 77Table of Contents C. Organizational Structure The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated variable interest entities as of thedate of this annual report on Form 20-F: (1) The other shareholders of Fairlubo Auction Company Limited, or Fairlubo, is 7 CHE Limited, which holds 5.06% of the equity interest in Fairlubo on afully diluted basis after taking into account the equity incentive plan of Fairlubo. (2) Youhan operates the website and mobile app for our 2B business and holds various licenses for our subsidiaries. (3) Shareholders of Youxin Hulian are Mr. Kun Dai, our CEO and Beijing Min Si Lian Hua Investment Management Co., Ltd., an affiliate of our shareholder,Redrock Holding Investments Limited. Mr. Kun Dai holds 99.9923% and Beijing Min Si Lian Hua Investment Management Co., Ltd. holds 0.0077% ofthe equity interest in Youxin Hulian. (4) Fengshun Lubao is wholly-owned by Yishouche, one of our consolidated VIEs. We have been conducting our salvage car auction business through ourVIE Fengshun Lubao and our WFOE Youxin Lubao. (5) Shareholders of Yishouche are Mr. Kun Dai, our CEO and Beijing Min Si Lian Hua Investment Management Co., Ltd., an affiliate of our shareholder,Redrock Holding Investments Limited. Mr. Kun Dai holds 99.9999% and Beijing Min Si Lian Hua Investment Management Co., Ltd. holds 0.0001% ofthe equity interest in Yishouche. We have been conducting our 2C business through our VIE Yishouche and our WFOE Yougu. (6) We currently conduct our consumer auto loan facilitation services through Kaifeng and other wholly-owned onshore subsidiaries. (7) We currently conduct our 2B services through our wholly owned subsidiary Youxin Shanghai and Youxinpai. 78Table of Contents Contractual Agreements with the VIEs and Their Respective Shareholders In order to comply with PRC regulatory requirements restricting foreign ownership of internet information services, value-addedtelecommunications, and certain other businesses in China, in the past we primarily conducted our 2B and 2C business through our VIE, Youxin Hulian. InJanuary 2015, Ministry of Industry & Information Technology announced the Notice of the Ministry of Industry and Information Technology on Removingthe Restrictions on Foreign-owned Shareholding Percentage in Online Data Processing and Transaction Processing (operating e-commerce) Business inChina (Shanghai) Pilot Free Trade Zone, or SHFTZ Notice. Pursuant to SHFTZ Notice, there are no restrictions on foreign investors maximum shareholdingpercentage in an enterprise established in Shanghai Pilot Free Trade Zone that conducts value-added telecommunications services in the scope of online dataprocessing and transaction processing (Operating E-commerce). Therefore, our eligible PRC subsidiaries Yougu and Youhan, have applied for and obtainedapproval from Shanghai Communications Administration to conduct e-commerce, and they have been operating our main online businesses instead of ourVIEs, Youxin Hulian and Yishouche, since then. Currently, Youxin Hulian, Yishouche, Fengshun Lubao and Dongwang hold valid ICP licenses. We have entered into a series of contractual arrangements, including exclusive option agreements, equity pledge agreements and exclusive businesscooperation agreements, with our VIEs and their respective shareholders. These contractual arrangements allow our WFOEs to: · exercise effective control over our VIEs and their subsidiaries; · receive substantially all of the economic benefits of our VIEs; and · have exclusive options to purchase all or part of the equity interests in our VIEs when and to the extent permitted by PRC law. As a result of our direct ownership in our WFOEs and the contractual arrangements relating to our VIEs, we are regarded as the primary beneficiary ofour VIEs, and we treat them and their subsidiaries as our consolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of ourVIEs and their respective subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. The following is a summary of the currently effective contractual arrangements (i) by and among Youxinpai (one of our WFOEs), Youxin Hulian(one of our VIEs) and Youxin Hulian’s shareholders, (ii) by and among Yougu (one of our WFOEs), Yishouche (one of our VIEs) and Yishouche’sshareholders, and (iii) by and among Youxin Lubao (one of our WFOEs), Fengshun Lubao (one of our VIEs) and Fengshun Lubao’s shareholder. Contractual Arrangements relating to Youxin Hulian The following is a summary of the currently effective contractual arrangements by and among Youxinpai, Youxin Hulian and the shareholders ofYouxin Hulian. Agreements that Provide Us with Effective Control over Youxin Hulian Equity Interest Pledge Agreements. Pursuant to the equity interest pledge agreements, each shareholder of Youxin Hulian has pledged all of his orher equity interests in Youxin Hulian to guarantee the shareholder’s and Youxin Hulian’s performance of their obligations under the amended and restatedexclusive business cooperation agreement, loan agreement entered into between Mr. Kun Dai and Youxinpai, exclusive option agreement and power ofattorney. If Youxin Hulian or its shareholders breach their contractual obligations under these agreements, Youxinpai, as pledgee, will be entitled to certainrights regarding the pledged equity interests, including receiving proceeds from the auction or sale of all or part of the pledged equity interests of YouxinHulian in accordance with the law. Each shareholder of Youxin Hulian agrees that, during the term of the equity interest pledge agreements, he or she will notdispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of Youxinpai.The equity interest pledge agreements remain effective until Youxin Hulian and its shareholders discharge all their obligations under the contractualarrangements. We have registered the equity pledge with the local branches of the Administration for Industry and Commerce in accordance with the PRCProperty Rights Law. 79Table of Contents Powers of Attorney. Pursuant to the powers of attorney, each shareholder of Youxin Hulian has irrevocably appointed Youxinpai to act as suchshareholder’s exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of Youxin Hulian requiringshareholder approval, disposing of all or part of the shareholder’s equity interests in Youxin Hulian, and appointing directors and executive officers.Youxinpai is entitled to designate any person to act as such shareholder’s exclusive attorney-in-fact without notifying or the approval of such shareholder,and if required by PRC law, Youxinpai shall designate a PRC citizen to exercise such right. Each power of attorney will remain in force for so long as theshareholder remains a shareholder of Youxin Hulian. Each shareholder of Youxin Hulian, has waived all the rights which have been authorized to Youxinpaiand will not exercise such rights. Agreement that Allows us to Receive Economic Benefits from Youxin Hulian Exclusive Business Cooperation Agreement. Under the amended and restated exclusive business cooperation agreement between Youxinpai andYouxin Hulian, Youxinpai has the exclusive right to provide Youxin Hulian with technical support, consulting services and other services. WithoutYouxinpai’s prior written consent, Youxin Hulian agrees not to accept the same or any similar services provided by any third party. Youxinpai may designateother parties to provide services to Youxin Hulian. Youxin Hulian agrees to pay service fees on a quarterly basis and at an amount determined by Youxinpaiafter taking into account multiple factors, such as the complexity and difficulty of the services provided, the time consumed, the content and commercialvalue of services provided, the market price of comparable services and the operation conditions. Youxinpai owns the intellectual property rights arising outof the performance of this agreement. In addition, Youxin Hulian has granted Youxinpai an irrevocable and exclusive option to purchase any or all of theassets and businesses of Youxin Hulian at the lowest price permitted under PRC law. Unless otherwise agreed by the parties or terminated by Youxinpaiunilaterally, this agreement will remain effective permanently. Agreements that Provide Us with the Option to Purchase the Equity Interest in Youxin Hulian Exclusive Option Agreement. Pursuant to the exclusive option agreements, each shareholder of Youxin Hulian has irrevocably granted Youxinpaian exclusive option to purchase, or have its designated person or persons to purchase, at its discretion, to the extent permitted under PRC law, all or part ofthe shareholder’s equity interests in Youxin Hulian. The purchase price shall be RMB10 (US$1.5) or the minimum price required by PRC law. If Youxinpaiexercises the option to purchase part of the equity interest held by a shareholder, the purchase price shall be calculated proportionally. Without Youxinpai’sprior written consent, Youxin Hulian shall not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of itsassets or beneficial interest, create or allow any encumbrance on its assets or other beneficial interests, provide any loans to any third parties, enter into anymaterial contract with a value of more than RMB500,000 (US$73 thousand) (except those contracts entered into in the ordinary course of business), mergewith or acquire any other persons or make any investments, or distribute dividends to the shareholders. Each shareholder of Youxin Hulian has agreed that,without Youxinpai’s prior written consent, he or she will not dispose of his or her equity interests in Youxin Hulian or create or allow any encumbrance ontheir equity interests. Moreover, without Youxinpai’s prior written consent, no dividend will be distributed to Youxin Hulian’s shareholders, and if any of theshareholders receives any profit, interest, dividend or proceeds of share transfer or liquidation, the shareholder must give such profit, interest, dividend andproceeds to Youxinpai or its designated person(s). These agreements will remain effective until all equity interests of Youxin Hulian held by its shareholderand all of the assets of Youxin Hulian have been transferred or assigned to Youxinpai or its designated person(s). Loan Agreement. Pursuant to the loan agreement between Youxinpai and Mr. Kun Dai shareholder of Youxin Hulian, dated November 23, 2016,Youxinpai made loans in an aggregate amount of RMB96.0 million (US$14.0 million) to Mr. Kun Dai solely for the capitalization of Youxin Hulian.Pursuant to the loan agreement, Youxinpai may at its sole discretion request the borrower to repay the loan by the sale of all his equity interest in YouxinHulian to Youxinpai or its designated person(s) pursuant to the exclusive option agreement. Mr. Kun Dai must pay all of the proceeds from sale of suchequity interests to Youxinpai. In the event the borrower sells his equity interests to Youxinpai or its designated person(s) with a price equivalent to or lessthan the amount of the principal, the loans will be interest free. If the price is higher than the amount of the principal, the excess amount will be paid toYouxinpai as the loan interest. The loan must be repaid immediately under certain circumstances, including, among others, if a foreign investor is permittedto hold majority or 100% equity interest in Youxin Hulian and Youxinpai elects to exercise its exclusive equity purchase option. The term of the loans is tenyears and can be extended upon mutual written consent of the parties. 80Table of Contents Contractual Arrangements relating to Yishouche The following is a summary of the currently effective contractual arrangements by and among Yougu, Yishouche and the shareholders of Yishouche. Agreements that Provide Us with Effective Control over Yishouche Equity Interest Pledge Agreements. Pursuant to the equity interest pledge agreements, each shareholder of Yishouche has pledged all of his or herequity interests in Yishouche to guarantee the shareholder’s and Yishouche’s performance of their obligations under the exclusive business cooperationagreement, exclusive option agreement and power of attorney. If Yishouche or any of its shareholders breaches their contractual obligations under theseagreements, Yougu, as pledgee, will be entitled to certain rights regarding the pledged equity interests, including receiving proceeds from the auction or saleof all or part of the pledged equity interests of Yishouche in accordance with the law. Each of the shareholders of Yishouche agrees that, during the term ofthe equity interest pledge agreements, he or she will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equityinterests without the prior written consent of Yougu. The equity interest pledge agreements remain effective until Yishouche and its shareholders dischargeall their obligations under the contractual arrangements. We have registered the equity pledge with the local branches of the Administration for Industry andCommerce in accordance with the PRC Property Rights Law. Powers of Attorney. Pursuant to the powers of attorney, each shareholder of Yishouche has irrevocably appointed Yougu to act as suchshareholder’s exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of Yishouche requiringshareholder approval, disposing of all or part of the shareholder’s equity interests in Yishouche, and appointing directors and executive officers. Yougu isentitled to designate any person to act as such shareholder’s exclusive attorney-in-fact without notifying or the approval of such shareholder, and if requiredby PRC law, Yougu shall designate a PRC citizen to exercise such right. Each power of attorney will remain in force for so long as the shareholder remains ashareholder of Yishouche. Each shareholder has waived all the rights which have been authorized to Yougu and will not exercise such rights. Agreement that Allows us to Receive Economic Benefits from Yishouche Exclusive Business Cooperation Agreement. Under the exclusive business cooperation agreement between Yougu and Yishouche, Yougu has theexclusive right to provide Yishouche with technical support, consulting services and other services. Without Yougu’s prior written consent, Yishoucheagrees not to accept the same or any similar services provided by any third party. Yougu may designate other parties to provide services to Yishouche.Yishouche agrees to pay service fees on a monthly basis and at an amount determined by Yougu and Yishouche after taking into account multiple factors,such as the complexity and difficulty of the services provided, the time consumed, the content and commercial value of services provided and the marketprice of comparable services and the operation conditions. Yougu owns the intellectual property rights arising out of the performance of this agreement. Inaddition, Yishouche has granted Yougu an irrevocable and exclusive option to purchase any or all of the assets and businesses of Yishouche at the lowestprice permitted under PRC law. Unless otherwise agreed by the parties or terminated by Yougu unilaterally, this agreement will remain effective permanently. Agreements that Provide Us with the Option to Purchase the Equity Interest in Yishouche Exclusive Option Agreements. Pursuant to the exclusive option agreements, each shareholder of Yishouche has irrevocably granted Yougu anexclusive option to purchase, or have its designated person or persons to purchase, at its discretion, to the extent permitted under PRC law, all or part of theshareholder’s equity interests in Yishouche. The purchase price shall be RMB10 (US$1.5) or the minimum price required by PRC law. Without Yougu’s priorwritten consent, Yishouche shall not amend its articles of association, increase or decrease the registered capital, sell or otherwise dispose of, or create orallow any encumbrance on its assets or beneficial interest with a value of more than RMB500,000 (US$72,722), provide any loans to any third parties, enterinto any material contract with a value of more than RMB500,000 (US$72,722) (except those contracts entered into in the ordinary course of business),merge with or acquire any other persons or make any investments, or distribute dividends to the shareholders. The shareholders of Yishouche have agreedthat, without Yougu’s prior written consent, they will not dispose of their equity interests in Yishouche or create or allow any encumbrance on their equityinterests. Moreover, without Yougu’s prior written consent, no dividend will be distributed to Yishouche’s shareholders, and if any of the shareholdersreceives any profit, interest, dividend or proceeds of share transfer or liquidation, the shareholder must give such profit, interest, dividend and proceeds toYougu or its designated person(s). These agreements will remain effective until all equity interests of Yishouche held by its shareholders and all of the assetsof Yishouche have been transferred or assigned to Yougu or its designated person(s). 81Table of Contents Contractual Arrangements relating to Fengshun Lubao The following is a summary of the currently effective contractual arrangements by and among Youxin Lubao, Fengshun Lubao and the shareholderof Fengshun Lubao. Agreements that Provide Us with Effective Control over Fengshun Lubao Equity Interest Pledge Agreements. Pursuant to the equity interest pledge agreements, the shareholder of Fengshun Lubao has pledged all of his orher equity interest in Fengshun Lubao to guarantee the shareholder’s and Fengshun Lubao’s performance of their obligations under the exclusive businesscooperation agreement, exclusive option agreement and power of attorney. If Fengshun Lubao or its shareholders breaches their contractual obligationsunder these agreements, Youxin Lubao, as pledgee, will be entitled to certain rights regarding the pledged equity interests, including receiving proceeds fromthe auction or sale of all or part of the pledged equity interests of Fengshun Lubao in accordance with the law. The shareholder of Fengshun Lubao agreesthat, during the term of the equity interest pledge agreements, he or she will not dispose of the pledged equity interests or create or allow any encumbrance onthe pledged equity interests without the prior written consent of Youxin Lubao. The equity interest pledge agreements remain effective until FengshunLubao and its shareholders discharge all their obligations under the contractual arrangements. As of the date of this annual report, we have registered theequity pledge of 99.99% of the equity interest in Fengshun Lubao with the local branches of the Administration for Industry and Commerce in accordancewith the PRC Property Rights Law, and are in the process of completing the registration for the remaining 0.01%. Powers of Attorney. Pursuant to the powers of attorney, the shareholder of Fengshun Lubao has irrevocably appointed Youxin Lubao to act as suchshareholder’s exclusive attorney-in-fact to exercise all shareholder rights, including, but not limited to, voting on all matters of Fengshun Lubao requiringshareholder approval, disposing of all or part of the shareholder’s equity interest in Fengshun Lubao, and appointing directors and executive officers. YouxinLubao is entitled to designate any person to act as such shareholder’s exclusive attorney-in-fact without notifying or the approval of such shareholder, and ifrequired by PRC law, Youxin Lubao shall designate a PRC citizen to exercise such right. The power of attorney will remain in force for so long as theshareholder remains a shareholder of Fengshun Lubao. Each shareholder has waived all the rights which have been authorized to Youxin Lubao and will notexercise such rights. Agreement that Allows us to Receive Economic Benefits from Fengshun Lubao Exclusive Business Cooperation Agreement. Under the exclusive business cooperation agreement between Youxin Lubao and Fengshun Lubao,Youxin Lubao has the exclusive right to provide Fengshun Lubao with technical support, consulting services and other services. Without Youxin Lubao’sprior written consent, Fengshun Lubao agrees not to accept the same or any similar services provided by any third party. Youxin Lubao may designate otherparties to provide services to Fengshun Lubao. Fengshun Lubao agrees to pay service fees on a monthly basis and at an amount determined by Youxin Lubaoand Fengshun Lubao after taking into account multiple factors, such as the complexity and difficulty of the services provided, the time consumed, thecontent and commercial value of services provided the market price of comparable services and the operation conditions. Youxin Lubao owns theintellectual property rights arising out of the performance of this agreement. In addition, Fengshun Lubao has granted Youxin Lubao an irrevocable andexclusive option to purchase any or all of the assets and businesses of Fengshun Lubao at the lowest price permitted under PRC law. Unless otherwise agreedby the parties or terminated by Youxin Lubao unilaterally, this agreement will remain effective permanently. 82Table of Contents Agreements that Provide Us with the Option to Purchase the Equity Interest in Fengshun Lubao Exclusive Option Agreements. Pursuant to the exclusive option agreements, the shareholder of Fengshun Lubao has irrevocably granted YouxinLubao an exclusive option to purchase, or have its designated person or persons to purchase, at its discretion, to the extent permitted under PRC law, all orpart of the shareholder’s equity interests in Fengshun Lubao. The purchase price shall be RMB10 (US$1.5) or the minimum price required by PRC law.Without Youxin Lubao’s prior written consent, Fengshun Lubao shall not amend its articles of association, increase or decrease the registered capital, sell orotherwise dispose of, or create or allow any encumbrance on its assets or beneficial interest with a value of more than RMB500,000 (US$72,722), provide anyloans to any third parties, enter into any material contract with a value of more than RMB500,000 (US$72,722) (except those contracts entered into in theordinary course of business), merge with or acquire any other persons or make any investments, or distribute dividends to the shareholder. The shareholder ofFengshun Lubao has agreed that, without Youxin Lubao’s prior written consent, it will not dispose of its equity interests in Fengshun Lubao or create orallow any encumbrance on its equity interests. Moreover, without Youxin Lubao’s prior written consent, no dividend will be distributed to FengshunLubao’s shareholder, and if the shareholder receives any profit, interest, dividend or proceeds of share transfer or liquidation, the shareholder must give suchprofit, interest, dividend and proceeds to Youxin Lubao or its designated person(s). These agreements will remain effective until all equity interests ofFengshun Lubao and all of the assets of Fengshun Lubao held by its shareholder have been transferred or assigned to Youxin Lubao or its designatedperson(s). In the opinion of JunHe LLP, our PRC counsel: · the ownership structures of our VIEs in China and our WFOEs that have entered into contractual arrangements with the VIEs will not result in anyviolation of PRC laws or regulations currently in effect; and · the contractual arrangements among Youxinpai, Youxin Hulian and the shareholders of Youxin Hulian, the contractual arrangements among Yougu,Yishouche and the shareholders of Yishouche and the contractual arrangements among Youxin Lubao, Fengshun Lubao and the shareholders ofFengshun Lubao governed by PRC law are valid, binding and enforceable, and do not and will not result in any violation of PRC laws or regulationscurrently in effect. However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. ThePRC regulatory authorities may in the future take a view that is contrary to the above opinion of our PRC counsel. If the PRC government finds that theagreements that establish the structure for operating our online businesses do not comply with PRC government restrictions on foreign investment in value-added telecommunications services businesses, such as internet content provision services and online data processing and transaction processing businesses(operating e-commerce business), we could be subject to penalties, including being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating someof our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existingregulations change in the future, we could be subject to penalties or be forced to relinquish our interests in those operations,” “Item 3. Key Information— D.Risk Factors—Risks Related to Doing Business in China—Failure to obtain certain filings, approvals, licenses, permits and certificates required for ourbusiness operations may materially and adversely affect our business, financial condition and results of operations”, “Item 3. Key Information—D. RiskFactors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit thelegal protections available to us” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Our business may besignificantly affected by the draft Foreign Investment Law and the newly adopted Foreign Investment Law.” D. Property, Plant and Equipment Our headquarters are located in Beijing. We currently have over 1,300 service centers operated by ourselves or our third-party local partners and 7regional transaction centers across China. As of the same date, our headquarters had an aggregate gross area of approximately over 15,000 square meters inBeijing, our service centers had an aggregate gross area of approximately 89,000 square meters across China, and our 7 regional transaction centers acrossChina had an aggregate gross area of approximately 370,000 square meters. We lease all the facilities to conduct our business. 83Table of Contents Item 4A. Unresolved Staff Comments None. Item 5. Operating and Financial Review and Prospects The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our auditedconsolidated financial statements and the related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See“Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. KeyInformation—D. Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantialrisks and uncertainties. A. Operating Results Overview We are the largest used car e-commerce platform in China, in terms of the number of transactions facilitated in 2018, according to iResearch. Ourplatform comprises Uxin Used Car, which caters to consumer buyers, and Uxin Auction, which caters to business buyers. We operate a transaction-centric platform with a variety of services. Through our 2C business, we provide consumers with a one-stop transactionexperience, including searching for the car of their choice, reviewing and assessing the car’s condition, and receiving other services including financing,insurance referral, delivery, title transfer and warranty, among others. Our ability to estimate the residual value of used cars and manage car collateral and riskallows us to facilitate loans effectively. Through our 2B business, we help businesses across China source vehicles, optimize turnover and facilitatetransactions among dealers of difference sizes across China. Our 2C business generates revenues from intra-regional and cross-regional businesses, each of which consists of revenue from (i) transactionfacilitation service fees in relation to connecting consumer buyers with used car sellers, facilitating car sales to consumers and providing after-sale warrantyand title transfer service, and (ii) fees in relation to auto loan facilitation services for both used cars and new cars. Our 2B business generates revenues fromtransaction facilitation service fees charged in relation to connecting business buyers with used car sellers and facilitating car sales through our auctionservice, as well as the title transfer service we provide. Since our inception in 2011, we have witnessed a significant growth of our business. In 2018, we facilitated 814,498 used car transactions and totalGMV reached RMB55.1 billion (US$8.0 billion), representing a 28.4% increase and a 26.9% increase, respectively, from 2017. In 2018, we also facilitated228,082 used car loan transactions and the total amount of used car loans facilitated reached RMB22.2 billion (US$3.2 billion), representing a 80.4%increase and a 69.9% increase, respectively, from 2017. Our total revenues increased significantly by 69.9% from RMB1,951.4 million in 2017 toRMB3,315.4 million (US$483.1 million) in 2018. Our net loss decreased from RMB2,747.8 million in 2017 to RMB1,538.3 million (US$224.1 million) in2018. 84Table of Contents Major Factors Affecting Our Results of Operations General Factors Affecting Our Results of Operations Our business and operating results are affected by general factors affecting China’s used car e-commerce industry, which include: · China’s overall economic growth and level of per capita disposable income; · changes in the supply and demand for new and used cars, and changes in geographic distribution of cars; · consumers and dealers’ acceptance of the online used car transaction model; and · regulation and policies affecting the used car industry and consumer auto finance industry. Unfavorable changes in any of these general industry conditions could negatively affect demand for our services and materially and adversely affectour results of operations. Specific Factors Affecting Our Results of Operations While our business is influenced by general factors affecting China’s used car e-commerce industry, we believe our results of operations are moredirectly affected by company specific factors, including the following: Ability to increase transaction volume on our platform We operate the largest used car e-commerce platform in China supported by a nationwide service network and our transaction enablementcapabilities. Our ability to continue to increase our transaction volume and GMV affects the growth of our business and our revenues. The total number ofused cars sold through our platform increased from 377,777 in 2016 to 634,317 in 2017 and further to 814,498 in 2018, representing 67.9% and 28.4%increase, respectively. The total GMV of our platform grew from RMB26.0 billion in 2016 to RMB43.4 billion in 2017 and further to RMB55.1 billion(US$8.0 billion) in 2018, representing 67.0% and 26.9% increase, respectively. We anticipate that our future revenue growth will continue to depend largelyon the increase of transaction volume on our platform. Our ability to increase transaction volume depends on, among other things, our ability to continuallyimprove the service and user experience that we offer, increase brand awareness, expand our service network and enhance our transaction enablement andtechnology capabilities. Ability to capture more service opportunities and increase take rate Our comprehensive coverage of a customer’s entire buying journey positions us well to provide a variety of services to customers. In addition to ourtransaction facilitation services, we also provide a comprehensive suite of other services to 2B and 2C customers that includes auto financing in our 2Cbusiness, title transfer, delivery and fulfillment, insurance referral and warranty. By offering these services, we generate more revenues and increase ouroverall take rate from the transactions. For example, we generated 48.4% and 53.5% of our total revenues from auto loan facilitation services in 2017 and2018, respectively. Leveraging our deep understanding of buyers and vehicles, our capabilities in estimating the residual value of used cars, and ourexperience in managing car collateral, we are able to effectively collaborate with our third-party financing partners, and enable them to offer a variety offinancing products through our platform, providing buyers with greater flexibility in their purchase decisions. We will continue to strengthen our servicesand provide more value-added services and products from time to time to capture additional opportunities. By providing a variety of services, we were able to achieve an average take rate of 2.6%, 3.6% and 5.1% in 2016, 2017 and 2018, respectively, asmeasured by the total used car transaction facilitation and loan facilitation revenues divided by our total GMV. The attach rate of used car loan facilitationservices in our 2C business was 45.5%, 44.5% and 46.1% in 2016, 2017 and 2018, respectively, as measured by the number of used car loans facilitateddivided by the total number of 2C used car transactions. Our ability to maintain or increase fees charged for transaction and loan facilitation services andprovide more services affects our take rate and financial performance. Ability to enhance operational efficiency Our results of operations are directly affected by our scale and operational efficiency. We currently have a nationwide service network comprisingmore than 1,300 service centers operated by ourselves or our third-party local partners and 7 transaction centers in more than 400 cities at prefecture level orabove across China. As our business grows, we expect to achieve greater operating leverage, improve the efficiency and utilization of our personnel, andobtain more favorable terms from our business partners. Our cost of revenues and total operating expenses as percentage of revenues decreased from 193.4%in 2017 to 177.4% in 2018. 85Table of Contents Marketing is critical to our business. Given the relatively low online penetration rate for the used car market in China, we need to educate the marketabout the benefits of purchasing used cars online and to raise our brand awareness. Sales and marketing expenses have historically represented a substantialmajority of our total operating expenses, amounting to 96.2%, 112.9% and 81.0% of our total revenues in 2016, 2017 and 2018, respectively. Our ability tolower our sales and marketing expenses as a percentage of total revenues depends on our ability to improve sales and marketing efficiency, including throughleveraging our brand value and through word-of-mouth referrals. We expect our sales and marketing expenses to increase in absolute amounts in order tofurther raise our brand awareness. Ability to effectively operate the auto loan facilitation business Our ability to facilitate auto loans affects our profitability and financial performance. Our loan facilitation revenue accounted for 48.4% and 53.5%of our total revenues in 2017 and 2018, respectively. Auto loans facilitated through our platform are primarily funded by our financing partners. The amountof available funds from our financing partners affect the total amount of loans that we are able to facilitate. As we expand our relationships with financingpartners, we are able to secure additional sources of funding for the loan transactions that we facilitate. Moreover, as we provide guarantees to our financingpartners for auto loans facilitated through our platform, our own risk management capabilities affect the financial performance of our auto loan facilitationbusiness. However, because we mainly facilitate auto loans in relation to the used car transactions facilitated on our platform, we are better able to verify theauthenticity of the auto loans, which enables us to more effectively operate the auto loan facilitation business. We also leverage our proprietary technologyto estimate the residual value of used cars, control our overall risk exposure, manage car collateral and detect fraud. Selected Statements of Operations Items Revenues We derive our revenues from our 2C and 2B businesses and other businesses. The following table presents our revenues by category, in terms ofabsolute amounts and as percentages of our total revenues for the periods presented. Years Ended December 31, 2016 2017 2018 RMB % RMB % RMB US$ % (in thousands) Revenues:To consumers (“2C”) – intra-regional395,97948.01,174,65660.22,045,675298,06461.7Transaction facilitation revenue81,8079.9230,25011.8481,05570,09214.5Loan facilitation revenue314,17238.1944,40648.41,564,620227,97247.2To consumers (“2C”) – cross-regional————373,72554,45311.3Transaction facilitation revenue————164,28023,9365.0Loan facilitation revenue————209,44530,5176.3To businesses (“2B”)293,22435.6519,27626.6606,59988,38418.3Transaction facilitation revenue293,22435.6519,27626.6606,59988,38418.3Others135,29816.4257,44013.2289,45042,1748.7Total revenues824,501100.01,951,372100.03,315,449483,075100.0 2C business Our 2C business generates revenues from intra-regional and cross-regional businesses, each of which comprises revenue from (i) transactionfacilitation services and (ii) loan facilitation services. 86Table of Contents Transaction facilitation revenue. For each used car sold through our 2C business, we charge a transaction facilitation service fee that equals thehigher of a certain percentage of the price of the car and a minimum fee. The transaction facilitation service fee is for services provided through our platformin connecting consumers with used car sellers, facilitating car sales to consumers and providing after-sale warranty. We recognize transaction facilitationrevenue when the service is rendered, except that the revenue relating to warranty services is deferred and recognized over the warranty period, which istypically one year. Loan facilitation revenue. We generate loan facilitation revenue primarily from the loan facilitation service fee we charge. For each consumer autoloan facilitated through our platform, we charge a loan facilitation service fee paid by the borrower at the beginning of the loan period. We charge servicefees for loan facilitation services in connection with loans for both used cars and new cars. We recognize loan facilitation revenue upfront when the loanfacilitation service is rendered. 2B business Our 2B business generates revenues from transaction facilitation services. We primarily charge the buyers a transaction facilitation service fee forconnecting business buyers with used car sellers and facilitating car sales through our auction service as well as for the title transfer service that we provide.We recognize transaction facilitation revenues when the transaction facilitation service is rendered. Others Our other revenues mainly include sales of new cars, commission from salvage cars sales and interest income from financial leases. Our sales of newcars business is a one-off project, and apart from selling our remaining new car inventory, we currently do not plan to continue the business in the future. Wegenerate revenues from our salvage car business primarily by charging the buyers a commission. We generate revenue from interest earned on financial leasesprovided primarily through inventory financing to dealers and consumers of our 2C business. Cost of Revenues Cost of revenues primarily consists of salaries and benefits expenses for personnel involved in quality control, auto inspection, transaction service,customer service and after-sale service, cost of title transfer and registration, costs related to cross-regional transaction fulfillment, delivery and logistics,rental expenses for transaction centers, GPS tracking device costs, cost of warranty and cost of new cars sold. We expect that our cost of revenues will increasein absolute dollar amounts as we continue to expand our business. Operating Expenses Our operating expenses primarily consist of (i) sales and marketing expenses, (ii) research and development expenses, (iii) general andadministrative expenses, and (iv) gains/(losses) from guarantee liability. Sales and marketing expenses Sales and marketing expenses primarily consist of branding expenses, customer acquisition expenses, and salaries and benefits expenses for our salesand marketing personnel, including sales consultants in our service centers. Branding expenses primarily include brand advertising costs. Customeracquisition expenses primarily include online traffic acquisition costs. We expect that our sales and marketing expenses will increase in absolute dollaramounts in the foreseeable future as we plan to engage in more sales and marketing activities to further promote our brand recognition, attract new customersand grow our businesses. 87Table of Contents Research and development expenses Research and development expenses primarily consist of salaries and benefits expenses for our research and development personnel and rentalexpenses for our research and development work place. We expect our research and development expenses will increase in absolute dollar amounts in theforeseeable future as we continue to invest in technology to attract customers and enhance customer experience. General and administrative expenses General and administrative expenses primarily consist of salaries and benefits for our management and administration employees involved ingeneral corporate functions, including share-based compensation for our senior management, office rental expenses, and professional service fees. We expectthat our general and administrative expenses will increase as we incur additional expenses relating to improving our internal controls, complying withSection 404 of the Sarbanes-Oxley Act and maintaining investor relations as a public company. Gains/(losses) from guarantee liability As part of our cooperation with various financing partners, we provide guarantees on the principal and interest obligations of defaulted loans.Gains/(losses) from guarantee liability is recorded when we, as a guarantor, are released from underlying risks of our guarantee obligation, i.e., when theunderlying loans are repaid by the consumers or when the financing partners are compensated by us in the event of a default. The credit performance of the auto loans facilitated through our platform directly affects the recognition of guarantee liability in our financialstatements. Gains/(losses) from guarantee liabilities during the period are recorded as the difference between the beginning balance and the ending balance ofthe guarantee liabilities during the period, adding fair value of guarantee liabilities of new guarantees incurred during the period, and subtracting theguarantees settled when we fulfill the guarantee obligation by compensating the financing partners in the event of a default. The guarantee liabilities arerecognized at fair value at the inception of the guarantees based on the third-party appraisal’s report. Our historical delinquency rate impacts the appraiser’sview of our guarantee liability recorded at the inception of each loan for new loans. As of December 31, 2016, 2017 and 2018, our total guarantee liabilitieswere RMB76.3 million, RMB173.9 million and RMB321.3 million (US$46.8 million), respectively. The total outstanding principal balance of loans that wefacilitated through our platform as of December 31, 2016, 2017 and 2018 reached RMB5.3 billion, RMB14.8 billion and RMB27.6 billion (US$4.0 billion),respectively, which, plus the accrued and unpaid interest, represents the maximum potential future payments that we could be required to make under ourguarantees. We closely monitor the credit performance of the auto loans facilitated through our platform based on delinquency rates by balance. We definedelinquency rate as the outstanding principal balance of used car loans that were 1 to 29, 30 to 59, 60 to 89 and 90 or more calendar days past due as apercentage of the sum of total outstanding principal balance of the used car loans facilitated through our 2C business (including the principal of loans wepaid financing partners under our guarantee to financing partners) as of a specific date. We will pay the remaining loan balance and any other payments dueto our financing partners under certain circumstances. See “Item 4. Information on the Company—B. Business Overview—Our Platform and Services—Our2C business—Consumer auto loan facilitation services.” The following table provides delinquency rates for our outstanding used car loans as of the datesindicated below: Delinquent For 1 - 29 days 30 - 59 days 60 - 89 days 90 days or more Used car loans:December 31, 20160.18%0.17%0.11%0.14%December 31, 20170.68%0.40%0.22%1.37%December 31, 20180.75%0.49%0.21%1.41% We started to facilitate loans for new cars through our platform in December 2016. Car collaterals of new car loans are generally more valuable thancar collaterals of used car loans. As we have a limited track record with respect to the loans for new cars, we believe the delinquency rates by loan balance fornew cars as of December 31, 2016, 2017 and 2018 are not representative of the potential performance of our loan facilitation services for new cars. The totaloutstanding principal balance of loans for new cars represented 12.4% of the total outstanding principal balance of auto loans facilitated through ourplatform as of December 31, 2018. 88Table of Contents Fair value change of derivative liabilities The fair value change of derivative liabilities is primarily related to bifurcated conversion features of our preferred shares, and to a lesser extent,related to the bifurcated share swap feature and redemption feature of our redeemable non-controlling interests. Upon the completion of our initial publicoffering, all of our preferred shares were converted into Class A ordinary shares on a one-for-one basis, and as such the derivative liabilities related to thebifurcated conversion features of our preferred shares, in the amount of RMB1,427.6 million as of December 31, 2017 and nil as of December 31, 2018,respectively, became shareholders’ equity. Taxation Cayman Islands Under the current laws of the Cayman Islands, our company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on incomeor capital gain. In addition, payments of dividends and capital in respect of our ordinary shares (and any consequential payments to the holders of our ADSs)will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of dividends or capital to any holder of ourordinary shares or ADSs, nor will gains derived from the disposal of our ordinary shares or ADSs be subject to Cayman Islands income or corporation tax. TheCayman Islands currently have no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. British Virgin Islands Some of our subsidiaries are companies incorporated in the British Virgin Islands. Under the current law of the British Virgin Islands, we are notsubject to income, corporation or capital gains tax in the British Virgin Islands. In addition, payment of dividends by the British Virgin Islands subsidiariesto their respective shareholders who are not resident in the British Virgin Islands, if any, is not subject to withholding tax in the British Virgin Islands. Hong Kong Our subsidiaries in Hong Kong are subject to the uniform tax rate of 16.5%. Under Hong Kong tax law, our subsidiaries in Hong Kong are exemptedfrom income tax on their foreign-derived income and there is no withholding tax in Hong Kong on remittance of dividends. No provision for Hong Kongprofits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax in 2016, 2017 and 2018. PRC Generally, our PRC subsidiaries, our VIEs and their subsidiaries are subject to enterprise income tax on their taxable income in the PRC at a rate of25%. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. Youxinpai(Beijing) Information Technology Co., Ltd. obtained High and New Technology Enterprises, or HNTE, status in December 2016, and is eligible to enjoy apreferential tax rate of 15% from 2016 to 2019. Youxin Internet (Beijing) Information Technology Co., Ltd. has been qualified as “Software Enterprises”eligible for preferential tax treatments, and thus was exempted from corporate income tax in PRC in 2016 and 2017 and will be allowed a 50% tax reductionat a statutory rate of 25% in 2018, 2019 and 2020. Our PRC subsidiaries, our VIEs and their subsidiaries are subject to VAT at a rate of 6% on the services provided and related surcharges, and 17%before April 30, 2018 and 16% since May 1, 2018 for the new cars sold. Under the EIT Law and its Implementation Rules, subject to any applicable tax treaty or similar arrangement between the PRC and the jurisdictionwhere the shareholders of our PRC subsidiaries reside that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% isnormally applicable to dividends from PRC sources payable to the shareholders that are non-PRC resident enterprises, which do not have an establishment orplace of business in the PRC, or which have such establishment or place of business if the relevant income is not effectively connected with the establishmentor place of business. Under the PRC Individual Income Tax Law and its implementation rules, dividends from sources within the PRC paid to foreignindividual shareholders who are not PRC residents are generally subject to a PRC withholding tax at a rate of 20%, subject to any reduction or exemption setforth in applicable tax treaties and PRC laws. Although substantially all of our business operations are based in the PRC, it is unclear whether dividends wepay with respect to our Class A ordinary shares or ADSs would be treated as income derived from sources within the PRC and as a result be subject to PRCincome tax if we were considered a PRC resident enterprise, as described below. See “Item 3. Key Information— D. Risk Factors—Risks Related to DoingBusiness in China—Under the EIT Law, we may be classified as a “resident enterprise” of China; such classification could result in unfavorable taxconsequences to us and our non-PRC shareholders and materially and adversely affect our results of operations and financial condition.” 89Table of Contents Results of Operations The following table summarizes our consolidated results of operations, both in absolute amounts and as percentages of our total revenues, for theperiods presented. For the Year EndedDecember 31,2016 2017 2018RMB% RMB % RMB US$ % (in thousands) Revenues:To consumers (“2C”) — intra-regionalTransaction facilitation revenue81,8079.9230,25011.8481,05570,09214.5Loan facilitation revenue314,17238.1944,40648.41,564,620227,97247.2To consumers (“2C”) — cross-regionalTransaction facilitation revenue————164,28023,9365.0Loan facilitation revenue————209,44530,5176.3To businesses (“2B”)—Transaction facilitationrevenue293,22435.6519,27626.6606,59988,38418.3Others135,29816.4257,44013.2289,45042,1748.7Total revenues824,501100.01,951,372100.03,315,449483,075100.0Cost of revenues(533,371)(64.7)(747,788)(38.3)(1,138,995)(165,957)(34.4)Gross Profit291,13035.31,203,58461.72,176,454317,11865.6Operating expenses:Sales and marketing(793,521)(96.2)(2,203,139)(112.9)(2,686,956)(391,502)(81.0)Research and development(167,791)(20.4)(226,010)(11.6)(329,430)(47,999)(9.9)General and administrative(1)(583,697)(70.8)(599,905)(30.7)(1,724,060)(251,204)(52.0)Gains/(losses) from guaranteeliability1,9830.22,2840.1(1,931)(281)(0.1)Total operating expenses(1,543,026)(187.1)(3,026,770)(155.1)(4,742,377)(690,986)(143.0)Loss from operations(1,251,896)(151.8)(1,823,186)(93.4)(2,565,923)(373,868)(77.4)Interest (income)/expenses, net6770.1(30,183)(1.5)(120,453)(17,550)(3.6)Other expenses, net(16,127)(2.0)(12,112)(0.6)(16,813)(2,450)(0.5)Foreign exchange gains/(losses)1,9180.2477(0.0)(8,232)(1,199)(0.2)Fair value change of derivativeliabilities(116,056)(14.1)(885,821)(45.4)1,185,090172,67335.7Loss before income tax expense(1,381,484)(167.6)(2,750,825)(141.0)(1,526,331)(222,394)(46.0)Income tax expense(1,805)(0.2)(570)(0.0)(14,585)(2,125)(0.4)Equity in (losses)/income ofaffiliates(9,637)(1.2)3,597(0.2)2,6313830.1Net loss(1,392,926)(168.9)(2,747,798)(140.8)(1,538,285)(224,136)(46.4) Note: (1) Share-based compensation in the amount of RMB226.4 million, RMB165.9 million and RMB1,052.0 million (US$153.3 million) in 2016, 2017 and2018, respectively, was charged to cost of revenues, sales and marketing expenses, research and development expenses, and general and administrativeexpenses. 90Table of Contents Year Ended December 31, 2018 Compared to Year Ended December 31, 2017 Revenues Our revenues increased by 69.9% from RMB1,951.4 million in 2017 to RMB3,315.4 million (US$483.1 million) in 2018. 2C business. Revenues of our 2C business increased significantly by 106.0% from RMB1,174.7 million in 2017 to RMB2,419.4 million (US$352.5million) in 2018, which was primarily attributable to the increases in both transaction facilitation revenue and loan facilitation revenue. The take rate of our2C business, as measured by the revenue of our 2C business divided by the GMV of our 2C business, was 4.0% and 5.5%, respectively, in 2017 and 2018.Revenues from our 2C intra-regional business increased by 74.2% from RMB1.2 billion in 2017 to RMB2.0 billion (US$298.1 million) in 2018. In addition,we generated revenues of RMB373.7 million (US$54.5 million) from our 2C cross-regional business as a result of our greater efforts in facilitating cross-regional transactions and higher pricing power enabled by our enhanced service and user experience. · Transaction facilitation revenue. The transaction facilitation revenue increased significantly by 180.3% from RMB230.3 million in 2017 toRMB645.3 million (US$94.0 million) in 2018, primarily due to the increases in the transaction volume and GMV of used cars sold through our 2Cbusiness as we expanded our nationwide footprint, especially in lower-tier cities, and as our loan facilitation services enabled more consumers tobuy used cars. The number of used cars sold through our 2C business increased by 74.3% from 283,829 units in 2017 to 494,826 units in 2018,while the corresponding GMV increased by 53.0% from RMB26.0 billion to RMB39.8 billion (US$5.8 billion) during the same period. Ourtransaction facilitation revenue increase was also attributable to our greater efforts in facilitating cross-regional transactions and higher pricingpower as a result of our enhanced service and user experience, as evidenced by the increase in transaction facilitation take rate, defined as thetransaction facilitation revenue divided by the GMV of our 2C business, from 0.9% in 2017 to 1.6% in 2018. · Loan facilitation revenue. Our loan facilitation revenue increased significantly by 87.8% from RMB944.4 million in 2017 to RMB1,774.1 million(US$258.5 million) in 2018, primarily driven by the increases in the volume and amount of loans we facilitated, which was in turn primarily drivenby the increase in the volume of used cars sold through our 2C business. The number of used car loans facilitated through our platform increased by80.4% from 126,419 in 2017 to 228,082 in 2018, and the GMV of used car transactions financed by used car loans increased from RMB16.7 billionin 2017 to RMB27.0 billion (US$3.9 billion) in 2018. The number of loans for new cars facilitated through our platform was 13,660 in 2017 and33,426 in 2018, and the GMV of new cars financed by loans was RMB1.6 billion in 2017 and RMB3.2 billion (US$467.4 million) in 2018. Theamount of used car loans facilitated through our platform increased by 69.9% from RMB13.1 billion in 2017 to RMB22.2 billion (US$3.2 billion)in 2018, while the amount of loans for new cars facilitated through our platform increased from RMB1.6 billion in 2017 to RMB3.4 billion(US$497.4 million) in 2018. The increase in our loan facilitation revenue was also attributable to the increase in average service fee rate for used carloan facilitation, as measured by the used car loan facilitation revenue divided by the total amount of used car loans facilitated, from 6.2% in 2017to 7.0% in 2018. 2B business. The transaction facilitation revenue of our 2B business increased by 16.8% from RMB519.3 million in 2017 to RMB606.6 million(US$88.4 million) in 2018, primarily attributable to our better service and higher pricing power. As a result, our transaction facilitation service take rate, asdefined by the transaction facilitation revenue divided by the GMV of our 2B business, also increased from 3.0% to 4.0% during the same period. 2Bbusiness GMV decreased by 12.2% from RMB17.4 billion in 2017 to RMB15.3 billion (US$2.2 billion) in 2018, mainly as a result of the changes in ourC2B business practices as we started to connect consumers with quality dealers on our platform instead of providing inspection and other services ourselves. 91Table of Contents Others. Our other revenues increased by 12.4% from RMB257.4 million in 2017 to RMB289.5 million (US$42.2 million) in 2018, primarilyattributable to the increase of RMB50.8 million (US$7.4 million) in the revenues generated from commission of salvage cars sales. Cost of revenues Our cost of revenues increased by 52.3% from RMB747.8 million in 2017 to RMB1,139.0 million (US$166.0 million) in 2018, primarily as a resultof the increases from RMB242.3 million in 2017 to RMB361.7 million (US$52.7 million) in 2018 in salaries and benefits of employees engaged in carinspection, quality control, customer service and after-sale service, costs of fulfillment, title transfer and registration, which were correspondingly driven bythe increase in the transaction volume, as well as service fees to third-party financing partners. Gross profit As a result of the foregoing, our total gross profit increased by 80.8% from RMB1.2 billion in 2017 to RMB2.2 billion (US$317.1 million) in 2018.Our gross profit margin increased from 61.7 % in 2017 to 65.6% in 2018, primarily because our revenues increased faster than our cost of revenues. Theincrease of our gross profit margin was also attributable to the increase of our take rate from 3.6% in 2017 to 5.1% in 2018, as measured by the total used cartransaction facilitation and loan facilitation revenues divided by our total GMV. Sales and marketing expenses Our sales and marketing expenses increased by 22.0% from RMB2.2 billion in 2017 to RMB2.7 billion (US$391.5 million) in 2018, primarilyattributable to the increase in our salaries and benefits expenses by 61.5% from RMB644.4 million in 2017 to RMB1,040.8 million (US$151.6 million) in2018, which was primarily due to the increased headcount from 6,190 as of December 31, 2017 to 7,224 as of December 31, 2018. Research and development expenses Our research and development expenses increased by 45.8% from RMB226.0 million in 2017 to RMB329.4 million (US$48.0 million) in 2018,primarily attributable to the increase from RMB184.7 million in 2017 to RMB245.3 million (US$35.7 million) in 2018 in salaries and benefits expenses foremployees engaged in research and development, which was in turn driven by the higher headcount and increased average salary as a result of our continuedefforts to strengthen our AI and other technological capabilities. Our research and development personnel headcount increased from 638 as of December 31,2017 to 845 as of December 31, 2018. General and administrative expenses Our general and administrative expenses increased by 186.7% from RMB599.9 million in 2017 to RMB1,724.1 million (US$251.2 million) in 2018,primarily attributable to the increase from RMB238.1 million in 2017 to RMB452.3 million (US$65.9 million) in 2018 in salaries and benefits expenses, andthe increase of RMB867.6 million (US$126.4 million) in share-based compensation following the consummation of our initial public offering, for employeesengaged in management and administrative positions or involved in general corporate functions in 2018. 92Table of Contents Gains/(losses) from guarantee liability We recorded losses from guarantee liability of RMB1.9 million (US$0.3 million) in 2018, compared to gains from guarantee liability of RMB2.3million in 2017. The change was primarily due to the increase in delinquency rate. Interest (income)/expense, net We had interest expense of RMB30.2 million in 2017 and RMB120.5 million (US$17.6 million) in 2018, attributable to the increase in ourborrowings and convertible notes. Since we recognize the deposits of interest at present value, the gap between actual amount of disbursement and bookvalue of deposits of interests is recognized as interest expense. Other expenses, net Other expenses increased from RMB12.1 million in 2017 to RMB16.8 million (US$2.5 million) in 2018. Foreign exchange gains/(losses) We had foreign exchange losses of RMB8.2 million (US$1.2 million) in 2018, compared to foreign exchange gains of RMB0.5 million in 2017. Thechange was primarily attributable to the appreciation of U.S. dollars against RMB in 2018. Fair value change of derivative liabilities Our fair value change of derivative liabilities was a gain of RMB1,185.1 million (US$172.7 million) in 2018, compared to a loss of RMB$885.8million in 2017. The increase in value between 2017 and 2018 was primarily due to the decrease in the value of our company. Income tax expense We had income tax expense of RMB0.6 million and RMB14.6 million (US$2.1 million), respectively, in 2017 and 2018, primarily resulting fromthe net taxable income position of certain operating entities in the PRC. Equity in (losses)/income of affiliates Equity in income of affiliates decreased by RMB1.0 million from RMB3.6 million in 2017 to an income of RMB2.6 million (US$0.4 million) in2018. The balance in 2017 was primarily attributable to the investment income recognized from revaluation of the previously held equity interest in Chefangand Baogu upon our acquisitions of the two entities in 2017. Net loss As a result of the foregoing, we had net losses of RMB2.7 billion and RMB1.5 billion (US$224.1 million), respectively, in 2017 and 2018. Year Ended December 31, 2017 Compared to Year Ended December 31, 2016 Revenues Our revenues increased by 136.7% from RMB824.5 million in 2016 to RMB1,951.4 million in 2017. 2C business. Revenues of our 2C business increased significantly by 196.6% from RMB396.0 million in 2016 to RMB1,174.7 million in 2017,which is attributable to the increases in both transaction facilitation revenue and loan facilitation revenue. The take rate of our 2C business, as measured bythe revenue of our 2C business divided by the GMV of our 2C business, was 2.5% and 4.0%, respectively, in 2016 and 2017. 93Table of Contents · Transaction facilitation revenue. The transaction facilitation revenue increased significantly by 181.5% from RMB81.8 million in 2016 toRMB230.3 million in 2017, primarily due to the increases in the volume and GMV of cars sold through our 2C business, which consist entirely ofused cars, as we expanded our nationwide footprint, especially in lower-tier cities, and as our loan facilitation services enabled more consumers tobuy used cars. The number of used cars sold through our 2C business increased by 118.2% from 130,076 units in 2016 to 283,829 units in 2017,while the corresponding GMV increased by 66.0% from RMB15,674 million to RMB26,016 million during the same period. Our transactionfacilitation revenue increase was also attributable to our more comprehensive services provided to customers on our platform as well as higherpricing power, as evidenced by the increase in transaction facilitation take rate, defined as the transaction facilitation revenue divided by the GMVof our 2C business, from 0.5% in 2016 to 0.9% in 2017. · Loan facilitation revenue. Our loan facilitation revenue increased significantly by 200.6% from RMB314.2 million in 2016 to RMB944.4 millionin 2017, primarily driven by the increases in the volume and amount of loans we facilitated, which was in turn primarily driven by the increase in thevolume of used cars sold through our 2C business. The number of used car loans facilitated through our platform increased by 113.6% from 59,177in 2016 to 126,419 in 2017, and the GMV of used car transactions financed by used car loans increased from RMB9,324 million in 2016 toRMB16,663 million in 2017. We started providing loan facilitation services for new cars in December 2016. The number of loans for new carsfacilitated through our platform was 13,660 in 2017 and the GMV of new cars financed by loans in the same period was RMB1,613.6 million. Theamount of used car loans facilitated through our platform increased by 110.7% from RMB6,199 million in 2016 to RMB13,065 million in 2017,while the amount of loans for new cars facilitated through our platform reached RMB1,582 million in 2017. The increase in our loan facilitationrevenue was also attributable to the increase in average service fee rate for used car loan facilitation, as measured by the used car loan facilitationrevenue divided by the total amount of used car loans facilitated, from 5.1% in 2016 to 6.2% in 2017. 2B business. The transaction facilitation revenue of our 2B business increased by 77.1% from RMB293.2 million in 2016 to RMB519.3 million in2017, primarily as a result of the increase in the GMV of used car sales facilitated by our 2B business. GMV increased by 68.5% from RMB10,313 million in2016 to RMB17,378 million in 2017. The increase in GMV was in turn attributable to the increases in the volume and in the average selling price of cars soldthrough our 2B business, which increased by 41.5% and 19.0%, respectively. Our transaction facilitation revenue increase was also attributable to our betterservice and higher pricing power, and as a result, our transaction facilitation service take rate, as defined by the transaction facilitation revenue divided bythe GMV of our 2B business, also increased from 2.8% to 3.0% during the same period. Others. Our other revenues increased by 90.3% from RMB135.3 million in 2016 to RMB257.4 million in 2017, primarily attributable to therevenue of RMB71.4 million generated from new car sales and RMB33.0 million generated from interest income from our Easy Loan program in 2017, whilewe did not have any revenue from new car sales or interest income of our Easy Loan program in 2016. Cost of revenues Our cost of revenues increased by 40.2% from RMB533.4 million in 2016 to RMB747.8 million in 2017, primarily as a result of the increase insalaries and benefits expenses as we hired more employees to expand our nationwide footprint and our service offerings, and to a lesser extent, due to theincrease in costs in relation to new cars sold. Gross profit Our total gross profit increased by 313.5% from RMB291.1 million in 2016 to RMB1,203.6 million in 2017. Our gross profit margin increased from35.3% in 2016 to 61.7% in 2017, primarily because our revenues, particularly revenues from our loan facilitation services, increased faster than our cost ofrevenues. The increase of our gross profit margin was also attributable to the increase of our take rate from 2.6% in 2016 to 3.6% in 2017, as measured by thetotal used car transaction facilitation and loan facilitation revenues divided by our total GMV. 94Table of Contents Sales and marketing expenses Our sales and marketing expenses increased by 177.6% from RMB793.5 million in 2016 to RMB2,203.1 million in 2017, primarily attributable tothe increase in our branding and customer acquisition cost, and to a lesser extent, attributable to the increase in the compensation to the sales and marketingpersonnel. Our branding expenses increased by 413.5% from RMB165.9 million in 2016 to RMB851.9 million in 2017, and our customer acquisition costincreased by 99.3% from RMB229.0 million in 2016 to RMB456.4 million in 2017, as we increased our spending on brand advertising to further enhanceour brand nationwide and on user acquisition, including through internet portals and search engines. Our sales and marketing personnel compensationexpenses increased by 152.6% from RMB255.1 million in 2016 to RMB644.4 million in 2017, primarily due to the increased headcount from 2,518 as ofDecember 31, 2016 to 6,190 as of December 31, 2017. Research and development expenses Our research and development expenses increased by 34.7% from RMB167.8 million in 2016 to RMB226.0 million in 2017, primarily attributableto the increase in salaries and benefits expenses for employees engaged in research and development, which was in turn driven by the higher headcount andincreased average salary as a result of our continued efforts to strengthen our AI and other technological capabilities. Our research and developmentpersonnel headcount increased from 496 as of December 31, 2016 to 638 as of December 31, 2017. General and administrative expenses Our general and administrative expenses increased by 2.8% from RMB583.7 million in 2016 to RMB599.9 million in 2017, primarily attributableto the increase in salaries and benefits expenses for employees engaged in management and administrative positions or involved in general corporatefunctions. Gains from guarantee liability Our gains from guarantee liability changed from RMB2.0 million in 2016 to RMB2.3 million in 2017, primarily due to the significant increase inthe total amount of loans facilitated through our platform, and our ability to better estimate our risk exposure to record adequate guarantee liabilities becausewe have a longer track record of facilitating loans. Interest (income)/expense, net We had interest income of RMB0.7 million in 2016, and interest expense of RMB30.2 million in 2017. The change from net interest income to netinterest expense was attributable to the higher amount of interest expense incurred as we disbursed increased deposits of interest to our financing partners.Since we recognize the deposits of interest at present value, the gap between actual amount of disbursement and book value of deposits of interests isrecognized as interest expense. Other expenses, net Other expenses decreased from RMB16.1 million in 2016 to RMB12.1 million in 2017. Foreign exchange gains Foreign exchange gains changed from RMB1.9 million in 2016 to RMB0.5 million in 2017, primarily attributable to our offshore deposits. 95Table of Contents Fair value change of derivative liabilities Our fair value change of derivative liabilities was RMB116.1 million in 2016, compared to RMB885.8 million in 2017. The increase in valuebetween 2016 and 2017 was primarily due to an increase in the value of our company. Income tax expense We had income tax expense of RMB1.8 million and RMB0.6 million, respectively, in 2016 and 2017, primarily resulting from the net profitposition of certain operating entities in the PRC. Equity in (losses)/income of affiliates Equity in (losses)/income of affiliates increased by RMB13.2 million from a loss of RMB9.6 million in 2016 to an income of RMB3.6 million in2017, primarily attributable to the investment income recognized from revaluation of the previously held equity interest in Chefang and Baogu upon ouracquisitions of the two entities. Net loss As a result of the foregoing, we had net losses of RMB1,392.9 million and RMB2,747.8 million, respectively, in 2016 and 2017. Critical Accounting Policies Critical Accounting Policies, Judgments and Estimates We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make estimates and assumptions that affectthe reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenuesand expenses during the reporting periods. We continually evaluate these judgments and estimates based on our own historical experience, knowledge andassessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe tobe reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimatesis an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require ahigher degree of judgment than others in their application. The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity ofreported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe thefollowing accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements. You should read thefollowing description of critical accounting policies, judgments and estimates in conjunction with our consolidated financial statements and otherdisclosures included in this annual report. Consolidation of variable interest entity (VIE) We account for entities qualifying as VIEs in accordance with Financial Accounting Standards Boards, or FASB, Accounting Standards CodificationTopic 810, Consolidation, or ASC 810. In order to comply with PRC regulatory requirements restricting foreign ownership of internet information services,value-added telecommunications, and certain other businesses in China, we have been conducting our online auction platforms through VIEs. In 2015, therestrictions on foreign-owned shareholding percentage in online data processing and transaction processing (operating E-commerce) business in China waspartially removed. Therefore, certain of our eligible WFOEs have applied for and obtained approval from Shanghai Communications Administration toconduct value-added telecommunications services in the scope of online data processing and transaction processing (operating E-commerce). As a result,certain of our WFOEs have been operating our main online platforms instead of our VIEs since then. Our VIEs mainly conduct other online platforms toprovide internet information services and they are holding some of our intellectual properties as well. Revenues from VIEs accounted for approximately12.6%, 12.5% and 10.2% of our total revenues in the years ended December 31, 2016, 2017 and 2018. 96Table of Contents We have entered into a series of contractual arrangements, including exclusive option agreement, equity pledge agreements and exclusive businesscooperation agreements, with our VIEs and their respective shareholders. As a result of our direct ownership in our WFOEs and the contractual arrangementsrelating to our VIEs, we are regarded as the primary beneficiary of our VIEs In accordance with ASC 810, and we treat them and their subsidiaries as ourconsolidated affiliated entities under U.S. GAAP. We have consolidated the financial results of our VIEs and their respective subsidiaries in our consolidatedfinancial statements in accordance with U.S. GAAP. Any changes in PRC laws and regulations that affect our ability to control our VIEs might preclude us from consolidating the entities in the future.We will continually evaluate whether we are the primary beneficiary of our VIEs as facts and circumstances change. Revenue recognition We primarily engage in operating a used car e-commerce platform through our mobile apps, Uxin Used Car and Uxin Auction, and websites,www.xin.com and www.youxinpai.com, providing used car transaction services and financing solutions offered by third-party financing partners. Revenueprincipally represents transaction facilitation revenue, loan facilitation revenue and others. We adopted ASC Topic 606, “Revenue from Contracts with Customers” for all periods presented. Consistent with the criteria of Topic 606, werecognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects toreceive in exchange for those goods or services. To achieve that core principle, an entity should apply five steps defined under Topic 606. We assesse our revenue arrangements against specificcriteria in order to determine if we are acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separateunits of accounting. Under the 2C business, we identified warranty services and other transaction facilitation services as performance obligations when thereis no loan facilitated, and identified a third performance obligation of loan facilitation services when there is a loan facilitated. We therefore considered theappropriate method to allocate the transaction price to each performance obligation based on the relative standalone selling prices of the services beingprovided. We do not sell all these services separately, and therefore, in estimating the standalone selling price for services that are not directly observable, weconsidered the suitable methods included in ASC 606-10-21-34, and determined the adjusted market assessment approach is the most appropriate method.When estimating the relative standalone selling prices, we consider selling prices of similar services. Revenue is recognized upon transfer of control ofpromised goods or services to a customer. From time to time, we provide cash incentives to both buyers and sellers. These incentives are given in the form of either a cash bonus to sellers or adiscount coupon to buyers, and are applied to the same transaction. As these incentives were provided without any distinct good or service in return, theseincentives have been recorded as reduction of revenue, pursuant to the guidance under ASC 606. Revenue is recorded net of cash incentives, value-added tax and related surcharges collected from customers, which are subsequently remitted togovernment authorities. 2C Our online platform and offline infrastructure facilitate used car dealers to list and sell used cars to individual consumers via cross-regional serviceand intra-regional service We started our cross-regional transaction facilitation service in the first quarter of 2018. The cross-regional transaction facilitationservices help individual consumers complete their purchases of cars without having the consumers physically inspect the cars on-site, which primarily applyfor the transactions when the consumers are located in different cities from where the cars are located; whereas intra-regional transaction facilitation servicescater to local individual consumers. Our offline infrastructure provides consumers with vehicle inspection, payment and settlement, delivery and fulfilmentservices, and warranty services. We do not charge transaction facilitation services fees to car dealers for certain transactions without financing solutionsattached. For those transactions with financing solutions offered by third-party financing partners, we have identified three performance obligations —transaction facilitation services, loan facilitation services and warranty services. The revenue relating to warranty services is deferred and recognized over thewarranty period as we stand ready to perform during that period. The transaction facilitation revenue is recognized at a point in time when the service isrendered, which occurs upon the completion of the successful transaction. We earn loan facilitation revenue from the borrowers along with the cross-regionaland intra-regional transaction facilitation services. We provide intermediary matching services to both the Borrowers and the third-party financing partner,which we describe as a loan facilitation service. The performance obligation is satisfied at a point in time upon completion of a transaction, and the loanfacilitation revenue is recognized accordingly when the service is rendered. 97Table of Contents 2B Launched in 2011, our 2B business, Uxin Auction(优信拍), caters to business buyers with a comprehensive suite of solutions, connecting businesseswith one another across China, helping them source vehicles, optimizing their turnover and facilitating cross-regional transactions. Business sellers includeused car dealers, 4S dealership, which are dealerships that are authorized to sell the products of a single brand of automobiles and provide key automobile-related services, car rental companies, auto manufactures and large corporation that may need to dispose of large fleets of used cars. Cars are sold throughUxin Auction through online auctions. We earn transaction facilitation income upon each successful close of an auction from buyers. Transaction facilitationincome, which is a certain percentage of the selling price of the underlying car or a minimum amount is recognized at a point in time following the transfer ofcontrol of such services to the customer, which occurs upon the completion of a successful transaction. As we do not assume inventory risk for the used cars,we are considered to be an agent in accordance with ASC 606. Accordingly, we recognize the transaction facilitation income when the performanceobligation is satisfied. Others Other revenue mainly comprises of revenues from new car sales, commission from salvage car sales, interest income from financial lease, etc. The revenue from sales of new cars is recognized when the title of the car is transferred to the buyer. Commission income of salvage car sales ischarged to the buyer and recognized upon completion of the transaction. In addition, prior to September 2015, we provided funds to consumers in the form of financial lease agreements. We continue to provide loansthrough our Easy Loan program to selected dealers in the form of financial lease agreements to help finance their inventory. In the second half of 2018, westarted to provide funds in the form of financial lease agreements to selected borrowers in addition to facilitating loans for the purchase of cars. In thesearrangements, we are considered the loan originator and hold such loans on our balance sheet. We generate interest income from these arrangements. Interestincome is measured at amortized cost using the effective interest method. Remaining performance obligations Revenue allocated to remaining performance obligations represent deferred revenue that has not yet been recognized. As of December 31, 2018, theaggregate amount of the transaction price allocated to remaining performance obligations was RMB115.2 million (US$16.8 million). We expect to recognize100% of this revenue over the next 12 months. Advance to consumers on behalf of financing partners We facilitate loans extended by third-party financing partners to consumers through our online platform. We started to cooperate with third-partyfinancing partners in September 2015. From September 2015, the funds for the consumer loans have been primarily provided by third-party financingpartners, while we provide services to facilitate such financing transactions. Pursuant to our cooperation arrangements with the financing partners, for thepurpose of registering the collateral over the car purchased by consumers with relevant government authorities, we advance the funds needed to purchase thecar to the consumer on the financing partners’ behalf to the applicable car dealers directly. The third-party financing partners shall then pay thecorresponding amount to us as agreed in the cooperation agreements. As of December 31, 2016, 2017 and 2018, the outstanding balance of our advances toconsumers on behalf of financing partners were RMB31.1 million, RMB827.4 million and RMB521.9 million (US$76.0 million), respectively. 98Table of Contents Financial lease receivables Financial lease receivables include dealer inventory financing receivables and receivables generated from finance lease arrangements we enteredinto with consumers before we started to cooperate with third-party financing partners in September 2015. We provide short-term inventory financing to certain selected car dealers through the Easy Loan program. Those car dealers can apply and obtainloans through the Easy Loan program to acquire cars for their inventories. In connection with the Easy Loan program, we and a third-party financing partnerenter into a financing business cooperation agreement, which establishes that loans provided to dealers are made in direct connection to the financial leasecontracts entered into between us and the dealers for the underlying cars. Pursuant to the financing business cooperation agreement, we extend the loan firstto the car dealers and then transfer the financial lease receivables to the third-party financing partner. Subsequently, we withdraw loans from the third-partyfinancing partner up to the credit limit granted by the third-party financing partner for the car dealers. The financing business cooperation agreement alsoestablishes our role as the guarantor for the loan balance outstanding from the third-party financing partner to the car dealers. We started to cooperate with third-party financing partners in September 2015. Before September 2015, we entered into finance lease arrangementswith consumers who needed financing in the car purchases. In the second half of 2018, we started to provide funds in the form of financial lease agreements toselected borrowers in addition to facilitating loans for the purchase of cars. Financial lease receivables are measured at amortized cost and reported on our consolidated balance sheets at outstanding principal adjusted for theallowance for credit losses. Allowance for financial lease receivables is provided when we have determined the balance is uncollectible. In general, weconsider financial lease receivables meeting any of the following conditions as uncollectible: (i) death of the borrower; (ii) identification of fraud, and thefraud is officially reported to and filed with relevant law enforcement departments or (iii) the amount remained outstanding 180 days past due and thereforedeemed uncollectible. Guarantee liabilities The third-party financing partners offer financing solutions to the borrowers and we provide a guarantee in the event of default. We guarantee fullrepayment of principal and accrued and unpaid interest to financing partners of all consumer auto loans facilitated through our platform. Depending on thespecific arrangements with each financing partner, once a loan is in default for more than eight days, we may be obligated to pay any overdue payments tothe financing partner. Once a loan is in default for more than 85 days, three consecutive installments, or six installments in total, we may be obligated to paythe remaining loan balance and any other payments due to the financing partner. We also post security deposits to financing partners in the aggregate amountof 12.7%, 9.6% and 8.4% of the aggregate outstanding loan balance of loans originated by the financing partner as of December 31, 2016, 2017 and 2018,respectively. If additional loans are originated by a financing partner through our platform, we post additional security deposit to the financing partner. Thedelinquency rates by used car loan balance as of December 31, 2018 that were 1 to 29, 30 to 59, 60 to 89 and 90 or more calendar days past due were0.75%,0.49%,0.21%,1.41%, respectively. The financial guarantee is within the scope of ASC Topic 460, Guarantees. The portion of the contract consideration that relates to ASC 460 mustfirst be allocated to the guarantee, with the residual portion of the transaction price being recorded under ASC Topic 606, “Revenue from Contracts withCustomers” ASC 606. The liability recognized at the inception of the guarantee should be an estimate of the guarantee’s fair value. Subsequent to the initial recognition of the guarantee liability, our guarantee obligations are measured as a combination of two components: (i) ASC460 component and (ii) ASC 450 component. The liability recorded based on ASC 460 is determined on a loan-by-loan basis and is reduced as we arereleased from the underlying risk, meaning as the loan is repaid by the borrower or when the financing partners are compensated in the event of a default. Theliability is reduced only as we are released from the underlying risk. This component is a stand ready obligation which is not subject to the probablethreshold used to record a contingent obligation. The other component is a contingent liability determined using historical experience of borrower defaults,representing the obligation to make future payments, measured using the guidance per ASC 450, Contingencies. Subsequent to the initial recognition, theguarantee obligation is measured at the greater of the amount determined per ASC 460 (guarantee liability) and the amount determined based on ASC 450(contingent liability). As stated in ASC 460-10-35-1, the guarantee liability should generally be reduced by recording a credit to net income as the guarantoris released from the guaranteed risk. Accordingly, the guarantee liability is recognized in “gains/(losses) from guarantee liability” in the consolidatedstatements of comprehensive loss by a systematic and rational amortization method, e.g. over the term of the loan. 99Table of Contents As of December 31, 2016, 2017 and 2018, our total guarantee liabilities were RMB76.3 million, RMB173.9 million and RMB321.3 million(US$46.8 million), respectively. As of December 31, 2016, 2017 and 2018, the total outstanding principal balance of loans that we facilitated through ourplatform reached RMB5.3 billion, RMB14.8 billion and RMB27.6 billion (US$4.0 billion), respectively, which, plus the accrued and unpaid interests,represents the maximum potential future payments that we could be required to make under the guarantee as of each of these dates. Based on ourmanagement’s assessment, the estimated value of collateral approximated the amounts of maximum potential future payments. Goodwill In accordance with ASC 805 Business Combination, goodwill represents the excess of the purchase consideration over the fair value of assets andliabilities of businesses acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually, or more frequently if events or changes incircumstances indicate that it might be impaired based on the requirements of ASC 350-20. In accordance with the FASB guidance on “Testing of Goodwillfor Impairment,” we have elected to perform a qualitative assessment to determine whether the two-step impairment testing of goodwill is necessary. In thisassessment, we consider primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specificinformation related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than thecarrying amount, the quantitative impairment test is performed. Otherwise, no further testing is required. Recoverability of goodwill is evaluated using a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying valueof the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assetsassigned to a reporting unit exceeds the fair value of a reporting unit, the second step of the impairment test is performed in order to determine the impliedfair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible and intangible assetsand liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting unit’s goodwill exceedsits implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. We estimate the total fair value of the reporting unitusing discounted cash flow analysis, and make assumptions regarding future revenue, gross margins, working capital levels, investments in new products,capital spending, tax, cash flows, and the terminal value of the reporting unit. In 2017, we acquired Chefang and Baogu and have consolidated their financial results in our consolidated financial statements since the respectivedates of acquisitions. As of December 31, 2018, we recorded goodwill in the amount of RMB4.1 million (US$0.6 million) and RMB4.2 million (US$0.6million) for Chefang and Baogu, respectively. As there were no identifiable intangible assets from the acquisitions of Chefang and Baogu, the goodwill is notamortized but is tested for impairment in accordance with ASC350. In 2018, RMB3.7 million of goodwill impairment loss was recorded for Chefang. In 2018, we acquired Zhejiang Dongwang Internet Technology Co., Ltd., or Dongwang, and have consolidated its financial results in ourconsolidated financial statements since the date of acquisition. As of December 31, 2018, we recorded goodwill in the amount of RMB38.2 million (US$5.6million).There were identifiable intangible assets from the acquisition of Dongwang. Those intangible assets were recognized and measured at fair valueupon acquisition and amortized over five years. Goodwill is not amortized but is tested for impairment in accordance with ASC350. 100Table of Contents Share-based compensation We follow ASC 718 to determine whether a share option or a restricted share unit should be classified and accounted for as a liability award orequity award. All grants of share-based awards to employees and directors classified as equity awards are recognized in the financial statements based on theirgrant-date fair values. We classify the share-based awards granted as equity awards, and have elected to recognize compensation expense relating to theshare-based awards with service condition on a graded vesting basis over the requisite service period, which is generally the vesting period. Under ASC 718, we apply the Binomial option pricing model in determining the fair value of options granted. ASC 718 requires forfeiture rates tobe estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based compensationexpense is recorded net of estimated forfeitures such that expense is recorded only for those share-based awards that are expected to vest. In February 2018, we adopted the Amended and Restated Plan. Under the Amended and Restated Plan, the maximum aggregate number of Class Aordinary shares that may be issued pursuant to all awards granted under the Amended and Restated Plan is 102,040,053. Options We granted 11,618,090, 12,819,330 and 25,224,000 options to our employees, with a weighted average exercise price of US$1.01, US$2.13 andUS$2.90, for the years ended December 31, 2016, 2017 and 2018. No options granted to employees were exercisable as of December 31, 2016 and 2017,whereas 18,659,232 options were exercisable as of December 31, 2018. No options granted to key management were exercisable as of December 31, 2016,whereas 9,800,000 and 7,300,000 options granted to key management became exercisable as of December 31, 2017 and 2018, respectively. The following table sets forth the information relating to the options granted in the years ended December 31, 2016, 2017 and 2018: Grant dateNumber of optionsWeighted-averageexerciseprice Weightedaveragefair valueofoptions Fair value of theunderlying ordinaryshares as of the grantdateUS$ US$ US$Year ended December 31, 201611,618,0901.011.31$1.54 - $2.26Year ended December 31, 201712,819,3302.131.72$2.26 - $4.48Year ended December 31, 201825,224,0002.903.32$1.62 - $5.29 The options granted were measured at fair value on the dates of grant using the Binomial option pricing model with the following assumptions: Year endedDecember 31,2016 Year endedDecember 31,2017 Year endedDecember 31,2018Expected volatility45% - 53%43% - 51%42%-47%Risk-free interest rate (per annum)2.08% - 2.40%2.08% - 2.32%2.49%~2.69%Exercise multiple2.8/2.22.8/2.22.8/2.2Expected dividend yield0%0%0%Contractual term (in years)101010 (1) The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expectedterm of our options. (2) The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a term consistent with the expectedterm of our options in effect at the option valuation date. 101(1)(2)(3)(4)(5)Table of Contents (3) The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price of when employees would decide to voluntarilyexercise their vested options. As we did not have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication. (4) The expected dividend yield is zero as we have never declared or paid any cash dividends on our shares, and we do not anticipate any dividendpayments in the foreseeable future. (5) The contractual term is the contract life of the option. Under the Amended and Restated Plan, employees are generally subject to a four-year service schedule, under which an employee earns anentitlement to vest in 25% of his or her option grants at the end of each year of completed service. As of December 31, 2018, the fair value of vested and nonvested options granted to employees and management amounted to RMB190.2 million(US$27.7 million) and RMB164.9 million (US$24.0 million), respectively, and a share-based compensation expense of RMB426.4 million (US$63.6 million)was recognized for the vested options. Other share-based awards For the year ended December 31, 2016, we recorded share-based compensation expense of RMB226.4 million for issuance and grant of 19,985,520ordinary shares to our management in April 2016. In September 2017, one of our preferred shareholders transferred 6,686,020 series A preferred shares and 10,590,390 series B preferred shares with aconsideration of US$41.2 million to Gao Li Group, which is controlled by Mr. Kun Dai, the chairman of our board of directors and chief executive officer.The difference between the transfer price and the fair value of preferred shares transferred was RMB137.7 million and was recognized as compensationexpense to Mr. Kun Dai in September 2017. In June 2018, we recorded share-based compensation expense of RMB620.4 million for the issuance of 17,742,890 restricted shares to Mr. Kun Dai,which were vested immediately upon consummation of a successful initial public offering. On May 25, 2018, one of our executive officers exercised his vested options to acquire 3,333,330 ordinary shares. In addition, we also offeredvesting acceleration to that executive officer’s 1,666,670 unvested options on May 25, 2018 and the executive officer also exercised such options to acquire1,666,670 ordinary shares. Therefore, in May 2018, we recorded all remaining unrecognized compensation costs which were accelerated in the amount ofRMB31.8 million. On June 27, 2018, RMB5.2 million share-based compensation was recorded as the redesignation of our ordinary shares and super voting power wasgranted to the beneficial owner of our Class B ordinary shares, Mr. Kun Dai. Fair value of our ordinary shares Prior to our initial public offering, we were a private company with no quoted market prices for our ordinary shares. We therefore needed to makeestimates of the fair value of our ordinary shares at various dates for the purposes of determining the fair value of our ordinary shares at the date of the grant ofa share-based compensation award as one of the inputs into determining the grant date fair value of the award. The following table sets forth the fair value of our ordinary shares estimated at different times with the assistance from an independent valuationfirm: Fair valueof ordinaryshares (US$) Discountrate DLOM Year ended December 31, 2016$1.54 - $2.2616.5%10%Year ended December 31, 2017$2.26 - $4.4815%10%Year ended December 31, 2018$1.62 - $5.29N/AN/A 102Table of Contents All the valuations set forth in the above table were performed on retrospective basis. We obtained a retrospective valuation instead of acontemporaneous valuation, because, on the various valuation dates, our financial and limited human resources were principally focused on our businessdevelopment efforts. This approach is consistent with the guidance prescribed by the AICPA Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. Specifically, the “Level B” recommendation in paragraph 16 of the PracticeAid sets forth the preferred types of valuation that should be used. As our primary approach in determining the fair value of our ordinary shares, we applied the income approach/discounted cash flow analysis basedon our projected cash flow using our best estimate as of the valuation date. The determination of the fair value of our ordinary shares requires complex andsubjective judgments to be made regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and ouroperating history and prospects at the time of valuation. Discount rates The discounted cash flow method of the income approach involves applying appropriate discount rates to discount the forecasted future cash flowsto the present value. We have considered the cost of equity in determining an appropriate discount rate. Cost of equity We calculated the cost of equity of the business as of the valuation dates using the capital asset pricing model, or CAPM, the most commonlyadopted method for estimating the required rate of return for equity. Under CAPM, the cost of equity is determined with consideration of the risk-free rate,systematic risk, equity market premium, size of our company, the scale of our business and our ability to achieve forecasted projections. In deriving the costof equity, certain publicly traded companies involving similar business were selected for reference as our guideline companies. To reflect the operatingenvironment in China and the general sentiment in the U.S. capital markets towards used car e-commerce businesses, the guideline companies were selectedwith consideration of the following factors: (i) the guideline companies should provide similar services, and (ii) the guideline companies should either havetheir principal operations in Asia Pacific region, as we operate in China, or are publicly listed companies in the United States as we plan to list our shares inthe United States. Discount for lack of marketability, or DLOM We also applied a discount for lack of marketability, or DLOM, of 10%, to reflect the fact that there is no ready market for shares in a closely-heldcompany like us. When determining the DLOM, the Finnerty’s Average Strike put options model was used. In this model, the cost of the put option, whichcan hedge the price change before the privately held shares can be sold, was considered as a basis to determine the DLOM. This option pricing method wasused because it takes into account certain company-specific factors, including the volatility of the share price of the guideline companies engaged in thesame industry. The increase in the fair value of our ordinary shares through 2016, 2017 and 2018 was primarily attributable to our continued revenue growth,significant growth of our 2C business, and anticipated higher revenue growth rate and lower discount rate due to a longer track record in achieving growthand the completion of our initial public offering. Recent Accounting Pronouncements See Item 17 of Part III, “Financial Statements—Note 2—Summary of significant accounting policies—Recent accounting pronouncements.” 103Table of Contents B. Liquidity and Capital Resources Cash flows and working capital In addition to experiencing net losses during the periods presented, we had net cash used in operating activities of RMB661.2 million, RMB1,834.2million and RMB2,281.3 million (US$332.4 million) in 2016, 2017 and 2018, respectively. Our principal sources of liquidity have been proceeds fromissuances of equity and equity-linked securities. · In January 2018, we raised an aggregate of US$250.0 million by issuing additional preferred shares to certain investors in a privateplacement. · In June 2018, we completed our initial public offering in which we issued and sold an aggregate of 25,000,000 ADSs, representing75,000,000 Class A ordinary shares, resulting in net proceeds to us of US$204.8 million. · Concurrently with our initial public offering, we sold convertible notes to CNCB (Hong Kong) Investment Limited (“the CNCB Note”) andGolden Fortune Company Limited (“the GF Note”), resulting in net proceeds to us of US$100 million and US$75 million, respectively. Theconvertible notes will become due and payable on June 27, 2019, or the Maturity Date, unless earlier converted, and the purchasers of theconvertible notes have the right to convert the convertible notes into Class A ordinary shares of our company during the period from andincluding the 181st day after June 27, 2018 to and including the Maturity Date, which right may be exercised twice only. The conversionprice per Class A ordinary share of the CNCB Note and the GF Note equals 109.5% and 108% of the initial public offering price per Class Aordinary share, respectively, and such conversion price may be adjusted. The CNCB Note and the GF Note each bears an interest rate of 6%and 6.5%, respectively, payable until the Maturity Date or such other times as the Notes are earlier repaid or redeemed; provided that if anyportion of the convertible notes are duly converted into Class A ordinary shares pursuant to the terms of the convertible notes, no interestaccrued on the principal amount being converted shall be payable. · As of December 31, 2018, we had an outstanding balance of short-term borrowings of RMB624.6 million (US$91.0 million) due within 12months, with a fixed annual interest rate of between 4.8% and 12.0%. As of December 31, 2018, we had RMB801.0 million (US$116.7 million) in cash and cash equivalents. Our cash and cash equivalents primarilyconsist of cash on hand, deposits placed with financial institutions that can be added to or withdrawn without limitation, and short-term and highly liquidinvestments that are readily convertible to known amount of cash and with original maturities from the date of purchase of generally three months or less. Asof December 31, 2018, we had RMB2,013.0 million (US$293.3 million) in restricted cash, which consisted primarily of security deposits for the guaranteeswe provided to our third-party financing partners for the repayment of consumer auto loans facilitated through our 2C business. As of December 31, 2016,2017 and 2018, the restricted cash in relation to our guarantees to financing partners represented 12.7%, 9.6% and 8.4% of the outstanding facilitated loanbalance as of each of those dates, respectively. As of December 31, 2018, we had RMB596.1 million (US$86.9 million) in short-term investments, whichconsisted of interest-bearing deposits and investment products placed with financial institutions with remaining maturities of over three months but less thantwelve months. We believe that our current cash and cash equivalents, proceeds from additional equity and debt financing and our anticipated cash flows fromoperations will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We may, however, needadditional capital in the future to fund our continuing operations. The issuance and sale of additional equity would result in further dilution to ourshareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict ouroperations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. 104Table of Contents As of December 31, 2018, 42.1% of our cash and cash equivalents and short-term investments were denominated in Renminbi and held in China,and the remaining cash and cash equivalents and short-term investments, denominated in U.S. dollars or Hong Kong dollars, were held outside China. As ofthe same date, 4.9% of our cash and cash equivalents and short-term investments were held by our VIEs and their subsidiaries. Although we consolidate the results of our VIEs and their subsidiaries, we only have access to the assets or earnings of our VIEs and theirsubsidiaries through our contractual arrangements with our VIEs and their shareholders. See “Item 4. Information on the Company—C. OrganizationalStructure—Contractual Agreements with the VIEs and Their Respective Shareholders.” For restrictions and limitations on liquidity and capital resources as aresult of our corporate structure, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding CompanyStructure.” In utilizing the proceeds we expect to receive from our initial public offering, we may make additional capital contributions to our PRC subsidiaries,establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, make loans to our PRC subsidiaries or VIEs, or acquireoffshore entities with business operations in China in offshore transactions. However, most of these uses are subject to PRC regulations and approvals. Forexample: · capital contributions to our PRC subsidiaries must be approved by the Ministry of Commerce or its local counterparts; and · loans by us to our PRC subsidiaries and VIEs to finance their activities cannot exceed statutory limits and must be registered with SAFE or itslocal branches. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange” and “Item 4.Information on the Company—D. Risk Factors—Risks Related to Doing Business in China—PRC regulations on loans and direct investments by offshoreholding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC entities.” A majority of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi. Under existing PRC foreignexchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments andtrade-and service related foreign exchange transactions. Our PRC subsidiaries may convert Renminbi amounts that they generate in their own businessactivities, including technical consulting and related service fees pursuant to their contracts with the VIEs, as well as dividends they receive from their ownsubsidiaries, into foreign exchange and pay them to their non-PRC parent companies in the form of dividends. However, current PRC regulations permit ourPRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with China accounting standards andregulations. Each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses eachyear, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cashdividends. Due to restrictions on the distribution of share capital from our PRC subsidiaries and also as a result of these entities’ unreserved accumulatedlosses, total restrictions placed on the distribution of our PRC subsidiaries’ net assets was RMB978.2 million (US$142.5 million), representing 41.1% of ourtotal consolidated net assets as of December 31, 2018. Furthermore, capital account transactions, which include foreign direct investment and loans, must beapproved by and/or registered with SAFE and its local branches. We can provide funding to our PRC subsidiaries and our VIEs and the subsidiaries of theVIEs through loans as long as the loan amount does not exceed the statutory limit, which is twice the amount of the relevant entities’ respective net assetscalculated in accordance with China accounting standards. The following table sets forth a summary of our cash flows for the periods indicated. For the Year Ended December 31, 2016 2017 2018 RMB RMB RMB US$ (in thousands) Summary Consolidated Statements of Cash Flow Data:Net cash used in operating activities(661,210)(1,834,243)(2,281,333)(332,400)Net cash generated from / (used in) investing activities9,341(1,498,219)(1,474,417)(214,829)Net cash (used in) / generated from financing activities(133,001)3,288,8424,274,052622,748Effect of exchange rate changes on cash and cash equivalents6,4643,334(9,278)(1,352)Net (decrease) / increase in cash and cash equivalents(778,406)(40,286)509,02474,167Cash and cash equivalents at beginning of the year1,110,665332,259291,97342,542Cash and cash equivalents at end of the year332,259291,973800,997116,709 105Table of Contents Operating Activities Net cash used in operating activities was RMB2,281.3 million (US$332.4 million) for the year ended December 31, 2018. In 2018, the differencebetween our net cash used in operating activities and our net loss of RMB1,538.3 million (US$224.1 million) mainly resulted from certain non-cashexpenses, including fair value change of derivative liabilities of RMB1,185.1 million (US$172.7 million), share-based compensation of RMB1,052.0 million(US$153.3 million), and changes in certain working capital accounts. Changes in the working capital accounts mainly included an increase in receivables,prepaid expenses and other current assets of RMB595.3 million (US$86.7 million), a decrease in deposit of interests from consumers and payable to financingpartners of RMB563.5 million (US$82.1 million) and an increase in advance to sellers of RMB446.4 million (US$65.0 million), partially offset by anincrease in payables, accruals and other current liabilities of RMB654.3 million (US$95.3 million) and an increase in advance to consumers on behalf offinancing partners of RMB305.5 million (US$44.5 million). The increase in receivables, prepaid expenses and other current assets was primarily attributableto the increase of prepaid marketing and consulting expenses. The decrease in deposit of interests from consumers and payable to financing partners wasprimarily because of the upfront deposit of interests from consumers and payable to financing partners were no longer collected. The increase in advance tosellers was primarily attributable to the expansion of 2C cross-regional business. Net cash used in operating activities was RMB1,834.2 million for the year ended December 31, 2017. The difference between our net cash used inoperating activities and our net loss of RMB2,747.8 million mainly resulted from certain non-cash expenses or gains, including shared-based compensationof RMB165.9 million, the fair value change of derivative liabilities of RMB885.8 million, and changes in certain working capital accounts. Changes in theworking capital accounts mainly included an increase in payables, accruals and other current liabilities of RMB911.6 million, an increase in deposit ofinterests from consumers and payable to financing partners of RMB628.9 million, partially offset by an increase in advance to sellers of RMB200.5 million,and an increase in loan recognized as a result of payment under the guarantee of RMB440.4 million. The increase in payables, accruals and other currentliability was primarily attributable to our increasing guarantee liability driven by the fast growth of our loan facilitation business. The increase in deposit ofinterests from consumers and payable to financing partners was primarily attributable to the upfront deposit of interests collected from consumers andpayable to financing partners and was in line with the growth of our loan facilitation business. The increase in advance from buyers collected on behalf ofsellers was primarily attributable to the rapid expansion of our 2B business. Net cash used in operating activities was RMB661.2 million for the year ended December 31, 2016. For the year ended December 31, 2016, thedifference between our net cash used in operating activities and our net loss of RMB1,392.9 million mainly resulted from certain non-cash expenses,including share-based compensation of RMB226.4 million, the fair value change of derivative liabilities of RMB116.1 million, and changes in certainworking capital accounts. Changes in the working capital accounts mainly included an increase in deposit of interests from consumers and payable tofinancing partners of RMB400.6 million, partially offset by an increase in financial lease receivables of RMB347.3 million. The increase in deposit ofinterests from consumers and payable to financing partners was primarily attributable to the upfront deposit of interests collected from consumers andpayable to financing partners and was in line with our loan facilitation business’ growth. The increase in financial lease receivables was primarily attributableto the growth of our Easy Loan program. Investing Activities Net cash used in investing activities was RMB1,474.4 million (US$214.8 million) for the year ended December 31, 2018, primarily attributable tothe increases in short-term investments and restricted cash of RMB595.1 million (US$86.7 million) and RMB395.8 million (US$57.7 million), respectively. 106Table of Contents Net cash used in investing activities was RMB1,498.2 million for the year ended December 31, 2017, which was primarily attributable to an increasein restricted cash of RMB911.4 million, the loan extended to a related party of RMB451.4 million, and the cash paid for long term investments of RMB152.7million. Net cash generated from investing activities was RMB9.3 million for the year ended December 31, 2016, which was primarily attributable to thedecrease in short-term investments of RMB670.8 million, partially offset by an increase in restricted cash of RMB566.7 million. Financing Activities Net cash generated from financing activities was RMB4,274.1 million (US$622.7 million) for the year ended December 31, 2018, primarilyattributable to net proceeds of RMB2,574.0 million (US$375.0 million) from initial public offering and issuance of convertible notes. Net cash generated from financing activities was RMB3,288.8 million for the year ended December 31, 2017, which was primarily attributable toproceeds of RMB2,721.1 million from issuance of convertible redeemable preferred shares. Net cash used in financing activities was RMB133.0 million for the year ended December 31, 2016, which was primarily attributable to repurchaseof ordinary shares of RMB306.0 million and repayment of borrowings of RMB183.0 million, partially offset by proceeds from issuance of convertibleredeemable preferred shares of Fairlubo and our company of RMB162.2 million. Holding Company Structure Uxin Limited is a holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiaries, ourVIEs and their subsidiaries in China. As a result, Uxin Limited’s ability to pay dividends depends upon dividends paid by our PRC subsidiaries. If ourexisting PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict theirability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of their retainedearnings, if any, as determined in accordance with China accounting standards and regulations. Under PRC law, each of our subsidiaries and our VIEs inChina is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% ofits registered capital. In addition, each of our wholly foreign-owned subsidiaries in China may allocate a portion of its after-tax profits based on Chinaaccounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and our VIEs may allocate a portion of their after-taxprofits based on China accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are notdistributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banksdesignated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meetthe requirements for statutory reserve funds. The table below sets forth the respective revenues and assets contribution of Uxin Limited and our subsidiaries and our VIEs as of the dates and forthe periods indicated: Net Revenues Total AssetsFor the YearEndedDecember 31,2016 For the YearEndedDecember 31,2017 For the YearEndedDecember 31,2018 As ofDecember 31,2017 As ofDecember 31,2018Uxin Limited and its wholly-ownedsubsidiaries87.4%87.5%89.8%90.5%96.1%VIEs12.6%12.5%10.2%9.5%3.9%Total100.0%100.0%100.0%100.0%100.0% Note: The percentages exclude the inter-company transactions and balances between Uxin Limited and its subsidiaries and the VIEs. 107Table of Contents Capital Expenditures We made capital expenditures of RMB94.9 million, RMB81.2 million and RMB133.9 million (US$19.5 million) in 2016, 2017 and 2018,respectively. In these periods our capital expenditures were mainly used for the purchase of computer equipment and software and leasehold improvements.We will continue to make such capital expenditures to support the expected growth of our business. C. Research and Development See “Item 4. Information on the Company—B. Business Overview—Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the yearended December 31, 2018 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capitalresources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. E. Off-Balance Sheet Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have notentered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financialstatements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity ormarket risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or creditsupport to us or engages in leasing, hedging or product development services with us. F. Contractual Obligations The following table sets forth our contractual obligations as of December 31, 2018: Payment due by periodTotal Less than 1year 1-3 years 3-5 years Greater than5 years(in RMB thousands)Borrowings1,106,389349,616523,773233,000—Interests payable127,65358,58457,90411,165—Operating lease commitments345,514102,05782,36150,116110,980Total1,579,556510,257664,038294,281110,980 The borrowings and interests payable represent our borrowings from commercial banks or other financial institutions for our working capital and thecorresponding interests payable. Our operating lease commitments relate to our leases of offices, including our nationwide service network which are under non-cancellableoperating lease agreements. We make guarantees to the financing partners for the repayment of the loans facilitated through our 2C business pursuant to our agreements with thefinancing partners. According to the guarantee arrangement, the terms of the guarantee could be either two years or three years. As of December 31, 2018, ourtotal guarantee liabilities were RMB321.3 million (US$46.8 million), and the total outstanding principal balance of loans that we facilitated through ourplatform was RMB27.6 billion (US$4.0 billion), which, plus the accrued and unpaid interests, represents the maximum potential future payments that wecould be required to make under the guarantee. 108Table of Contents Other than the above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2018. Item 6. Directors, Senior Management and Employees A. Directors and Senior Management The following table sets forth information regarding our executive officers and directors as of the date of this annual report. Directors and Executive OfficersAgePosition/TitleKun Dai37Chairman of the Board of Directors and Chief Executive OfficerZhen Zeng37Director and Chief Financial OfficerDou Shen39DirectorCheung Lun Julian Cheng45DirectorRong Lu48Independent DirectorBrian Hongdi Gu46Independent DirectorWilliam Peng40Chief Operating OfficerWenbing Jing38Chief Strategy OfficerXin Wang35Chief Marketing OfficerHui Qiu32Chief Technology Officer Mr. Kun Dai is our founder and has served as chairman of our board of directors and chief executive officer since our inception. Mr. Dai has beeninvolved in internet and automobile industries for over ten years. Mr. Dai founded one of China’s first online used car websites, CarResume.com, in 2005.From 2007 to 2011, Mr. Dai worked at an NYSE-listed auto information provider, BitAuto, first as deputy general manager and later as vice president. Mr. Daireceived a master’s degree in Commerce from Cardiff University. Mr. Zhen Zeng joined us in 2011 and serves as our chief financial officer. He has also served as our director since June 2018. Mr. Zeng has over tenyears of experience in finance. From 2010 to 2011, Mr. Zeng served as a vice president in finance at Civa Printal. From 2006 to 2010, Mr. Zeng served as anaudit manager at PricewaterhouseCoopers. Mr. Zeng received a master’s degree in Commerce and Accounting from Griffith University. Mr. Dou Shen has been serving as our director since May 2018. Presently, Mr. Shen is a vice president at Baidu Search and also responsible for theoperation of Baidu Feed. From 2012 to 2017, Mr. Shen had served as several senior management roles including technical director and senior technicaldirector of Web Search Department, executive director of Financial Services Group and deputy director and technical director of Research and DevelopmentDepartment of Baidu Inc. Mr. Shen received his bachelor’s degree from North China Electric Power University, master degree from Tsinghua University anddoctoral degree from Hong Kong University of Science and Technology. Mr. Cheung Lun Julian Cheng has been serving as our director since March 2014. Presently, Mr. Cheng is a managing director at Warburg PincusAsia LLC and co-leads Warburg Pincus’ business in China. Mr. Cheng joined Warburg Pincus in 2000. Prior to joining Warburg Pincus, Mr. Cheng was ininvestment banking with Salomon Smith Barney and Deutsche Bank in Hong Kong. Mr. Cheng received a bachelor’s degree from Harvard University. Ms. Rong Lu has been serving as our director since October 2017. Presently, Ms. Lu is an independent venture capitalist investing in technologystart-ups in the United States and China. In 2006, she co-founded DCM China, an early-stage venture capital firm. During her more than 12-year tenure atDCM, Ms. Lu invested in and served as a board member for many companies including YUM China, Kuaishou, BitAuto Holdings Ltd., E-Commerce ChinaDangdang Inc., Pactera Technology International Ltd., DXY.cn, and HaoDF.com. She also served as an independent director and Chairman of the specialcommittee for iKang Healthcare Group, Inc. and iDreamSky Technologies Limited before they were taken private. Prior to joining DCM in 2003, Ms. Lu wasa Vice President in the technology, media and telecommunications investment banking group of Goldman Sachs & Co. in Menlo Park, California. Ms. Lureceived her master’s degree in international economics and energy, environment, science and technology from Johns Hopkins University, School ofAdvanced International Studies and bachelor’s degree in economics from the University of Maryland, Baltimore County. 109Table of Contents Mr. Brian Hongdi Gu has served as our independent director since June 2018. Presently, Mr. Gu is also a president at Xiaopeng Motors. From 2004to 2018, Mr. Gu worked at JPMorgan Chase & Co where he served as a chairman of Asia Pacific investment banking. From 1999 to 2004, Mr. Gu served as avice president at Lehman Brothers Holdings Inc. Mr. Gu received his bachelor’s degree from University of Oregon, doctoral degree from University ofWashington and MBA from Yale University. Mr. William Peng joined us in 2015 and serves as our chief operating officer. From 2006 to 2015, Mr. Peng was an executive director at WarburgPincus, in charge of investment and portfolio management of China TMT businesses, and led Warburg Pincus’ Series C investment in our company. From2002 to 2006, Mr. Peng served as a senior associate, senior director, and general manager of gaming sector at Sina. From 2000 to 2002, Mr. Peng was aninvestment banking analyst in Deutsche Bank’s New York office. Mr. Peng received a Bachelor’s degree in Computer Science from Cornell University. Mr. Wenbing Jing joined us in 2011 and serves as our chief strategy officer. From 2015 to 2016, Mr. Jing served as our vice president and generalmanager of marketing division of Uxin Auction. From 2011 to 2015, Mr. Jing served as our vice president and general manager of Uxin Auction’s SouthChina business. From 2007 to 2010, Mr. Jing worked at New World Group and gained experiences in platform trading industry. Mr. Jing received a master’sdegree in Law from Cardiff University. Ms. Xin Wang joined us in 2016 and serves as our chief marketing officer. From 2015 to 2016, Ms. Wang was a senior marketing director at UberChina. Before that, Ms. Wang served as management consultant in Booz & Company and Oliver Wyman. She received a master’s degree in Management fromYale University. Ms. Hui Qiu joined us in 2014 and serves as our chief technology officer. From 2011 to 2014, Ms. Qiu worked at Qihoo 360. From 2008 to 2011,Ms. Qiu worked at Tencent Research Institute. In 2008, Ms. Qiu worked at Microsoft Research Asia. Ms. Qiu received a master’s degree in SoftwareEngineering from Peking University. B. Compensation Compensation of Directors and Executive Officers For the year ended December 31, 2018, we paid an aggregate of RMB5.0 million (US$0.7 million) in cash to our executive officers, and we did notpay any cash compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similarbenefits to our executive officers and directors. Our PRC subsidiaries and consolidated affiliated entity are required by law to make contributions equal tocertain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and ahousing provident fund. Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers isemployed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of theexecutive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts to our detriment, ormisconduct or a failure to perform agreed duties. We may also terminate an executive officer’s employment without cause upon three-month advance writtennotice. In such case of termination by us, we will provide severance payments to the executive officer as expressly required by applicable law of thejurisdiction where the executive officer is based. The executive officer may resign at any time with a three-month advance written notice. Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidenceand not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of ourconfidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietaryinformation of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose inconfidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment withus and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for theseinventions, designs and trade secrets. 110Table of Contents In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or heremployment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach oursuppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for thepurpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment withor provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our expressconsent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the executive officer’stermination, or in the year preceding such termination, without our express consent. We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree toindemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason oftheir being a director or officer of our company. 2018 Amended and Restated Share Incentive Plan We adopted the 2018 Amended and Restated Share Incentive Plan in February 2018, which was further amended in August 2018 andNovember 2018, for the purpose of promoting the success and enhance the value of our company, by linking the personal interests of the members of theboard, employees, consultants and other individuals to those of our shareholders and, by providing an incentive for outstanding performance, to generatesuperior returns for our shareholders. In November 2018, we increased the number of shares reserved for future awards under the plan, and renamed it 2018Second Amended and Restated Share Incentive Plan, which we refer to as the Amended and Restated Plan in this annual report. Under the Amended andRestated Plan, the maximum aggregate number of shares which may be issued pursuant to all awards is 102,040,053 Class A ordinary shares. As ofFebruary 28, 2019, 133,334 restricted share units and 54,124,044 share options have been issued and outstanding under the Amended and Restated Plan. The following paragraphs summarize the terms of the Amended and Restated Plan. Types of Awards. The Plan permits the awards of options, stock appreciation right, dividend equivalent right, restricted shares and restricted shareunits or other right or benefit under the Plan. Plan Administration. The board or a committee appointed by the board acts as the plan administrator. The plan administrator will determine theparticipants who are to receive awards, the type or types of awards to be granted, the number of awards to be granted, and the terms and conditions of eachaward grant. The plan administrator can amend outstanding awards and interpret the terms of the Amended and Restated Plan and any award agreement. Award Agreement. Awards granted under the Amended and Restated Plan are evidenced by an award agreement that sets forth the terms andconditions for each grant. Exercise Price. The excises price of an option will be determined by the plan administrator, but in the case of an award issued in connection withacquisitions, the exercise or purchase price for the award shall be determined in accordance with the provisions of the relevant instrument evidencing theagreement to issue such award. Eligibility. We may grant awards to our employees, consultants, and all members of the board, and other individuals. Term of the Awards. The term of each option or share appreciation right granted under the Amended and Restated Plan shall not exceed ten yearsfrom date of the grant. 111Table of Contents Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement. Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution,except as otherwise provided by the plan administrator. The grantee may designate one or more beneficiaries of the grantee’s award in the event of thegrantee’s death on a beneficiary designation form provided by the administrator. Termination. The plan shall terminate in February 2028, provided that our board may terminate the plan at any time and for any reason. The following table summarizes the outstanding options and restricted share units that we had granted to our directors and executive officers underthe Amended and Restated Plan as of February 28, 2019: OrdinarySharesUnderlyingOutstandingOptions orRestrictedShare units Exercise Price($/Share)Grant DateExpiration DateKun Dai————Zhen Zeng*0.0001 to 3.00Various dates from March 26, 2013 toFebruary 14, 2018March 23, 2023Rong Lu*—Various dates from November 19, 2018 toDecember 31, 2018February 13, 2028Brian Hongdi Gu*—Various dates from November 19, 2018 toDecember 31, 2018February 13, 2028Wenbing Jing*0.10 to 3.00Various dates from March 26, 2013 toFebruary 14, 2018March 23, 2023William Peng*0.0001 to 3.00Various dates from November 2, 2015 toFebruary 14, 2018November 2, 2025Hui Qiu*0.20 to 3.00Various dates from January 30, 2015 toFebruary 14, 2018January 30, 2025Xin Wang*0.0001 to 3.00Various dates from December 22, 2016 toFebruary 14, 2018December 22, 2026Total18,233,334 * Less than 1% of our total ordinary shares outstanding on as-converted basis. As of February 28, 2019, other grantees as a group held options to purchase 36,024,044 Class A ordinary shares of our company, with exercise pricesranging from US$0.0001 to US$3.00 per share. C. Board Practices Board of Directors Our board of directors consists of six directors. A director is not required to hold any shares in our company by way of qualification. A director mayvote with respect to any contract, proposed contract or arrangement in which he is materially interested provided (i) such director, if his interest in suchcontract or arrangement is material, has declared the nature of his interest at the earliest meeting of the board at which it is practicable for him to do so, eitherspecifically or by way of a general notice and (ii) if such contract or arrangement is a transaction with a related party, such transaction has been approved bythe audit committee. The directors may exercise all the powers of the company to borrow money, and to mortgage or charge its undertaking, property anduncalled capital, and issue debentures, debenture stock or other securities whenever money is borrowed or as security for any debt, liability or obligation ofthe company or of any third party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of service. 112Table of Contents Committees of the Board of Directors We have established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporategovernance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below. Audit Committee. Our audit committee consists of Rong Lu and Brian Hongdi Gu. Rong Lu is the chairperson of our audit committee. We havedetermined that Rong Lu and Brian Hongdi Gu satisfy the “independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules. We havedetermined that Rong Lu qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processesand the audits of the financial statements of our company. The audit committee is be responsible for, among other things: · appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independentauditors; · reviewing with the independent auditors any audit problems or difficulties and management’s response; · discussing the annual audited financial statements with management and the independent auditors; · reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor andcontrol major financial risk exposures; · reviewing and approving all proposed related party transactions; · meeting separately and periodically with management and the independent auditors; and · monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures toensure proper compliance. Compensation Committee. Our compensation committee consists of Rong Lu and Brian Hongdi Gu. Rong Lu is the chairperson of ourcompensation committee. We have determined that Rong Lu and Brian Hongdi Gu satisfy the “independence” requirements of Rule 5605 of the NasdaqStock Market Rules. The compensation committee assists the board in reviewing and approving the compensation structure, including all forms ofcompensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which hiscompensation is deliberated. The compensation committee is responsible for, among other things: · reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executiveofficers; · reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; · reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and · selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’sindependence from management. 113Table of Contents Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Rong Lu and Brian HongdiGu. Rong Lu is the chairperson of our nominating and corporate governance committee. We have determined that Rong Lu and Brian Hongdi Gu satisfy the“independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules. The nominating and corporate governance committee assists the board ofdirectors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating andcorporate governance committee is responsible for, among other things: · selecting and recommending to the board nominees for election by the shareholders or appointment by the board; · reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills,experience and diversity; · making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and · advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as ourcompliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on anyremedial action to be taken. Terms of Directors and Executive Officers Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and hold office untilsuch time as they resign by notice in writing to our company, or are removed from office by an ordinary resolution of the shareholders or by the board. Inaddition, a director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement orcomposition with his creditors; or (ii) is found by our company to be or becomes of unsound mind; (iii) without special leave from the Board, is absent frommeetings of the Board for three consecutive meetings and the Board resolves that an office be rated; or (iv) is removed from office pursuant to our currentmemorandum and articles of association. D. Employees As of December 31, 2018, we had a total of 12,619 employees. We had a total of 11,326 employees as of December 31, 2017 and 5,439 employees asof December 31, 2016. The following tables give breakdowns of our employees as of December 31, 2018 by function: As of December31,2018Function:Finance and legal253Human resource51Marketing56Products and technology790Operations9,759Sales5,567Car inspection professionals2,078After-sale customer service748Other operations1,366Corporate development1,650Others60Total12,619 114Table of Contents E. Share Ownership The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 28, 2019 by: · each of our directors and executive officers; and · each of our principal shareholders who beneficially own 5% or more of our ordinary shares on an as-converted basis. The calculations in the table below are based on 880,678,805 ordinary shares outstanding as of February 28, 2019, comprising of (i) 839,868,944Class A ordinary shares, excluding the 23,501,589 Class A ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for futureissuances upon the exercise or vesting of awards granted under our Amended and Restated Plan, and (ii) 40,809,861 Class B ordinary shares. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially ownedby a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including throughthe exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of thepercentage ownership of any other person. Class AOrdinaryShares Class BOrdinaryShares TotalOrdinaryShares %† % ofAggregateVoting Power††Directors and Executive Officers**:Kun Dai93,170,30040,809,861133,980,16115.240.2Zhen Zeng*—**Dou Shen————Cheung Lun Julian Cheng————Rong Lu*—**Brian Hongdi Gu*—**William Peng*—**Wenbing Jing*—**Xin Wang*—**Hui Qiu*—**All Directors and Executive Officers in the aggregate106,695,86140,809,861147,505,72216.741.3 Principal Shareholders:Xin Gao Group Limited—40,809,86140,809,8614.632.7Jeneration Capital Affiliated Entities129,076,788—129,076,78814.710.3Redrock Holding Investments Limited112,197,310—112,197,31012.79.0Baidu (Hong Kong) Limited79,832,280—79,832,2809.16.4Snow Lake Capital (HK) Limited77,884,479—77,884,4798.86.2Kingkey Affiliated Entities75,893,890—75,893,8908.66.1Hillhouse UX Holdings Limited66,750,480—66,750,4807.65.3LC Affiliated Funds63,142,198—63,142,1987.25.1Cathay Rong IV Limited57,045,450—57,045,4506.54.6Tiger Global Affiliated Entities57,000,000—57,000,0006.54.6 * Less than 1% of our total outstanding shares. 115(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)Table of Contents ** Each of Mr. Kun Dai, Zhen Zeng, William Peng, and Xin Wang’s business address is 2-5/F, Tower E, LSHM Center, No.8 Guangshun South Avenue,Chaoyang District, Beijing, People’s Republic of China. Each of Mr. Wenbing Jing and Ms. Qiu Hui’s business address is 2/F, Lixinghang Center E,Guangshun South Street, Wang Jing, Chaoyang District, Beijing, People’s Republic of China. Ms. Cheung Lun Julian Cheng’s business address isSuite 6703, International Finance Centre II, 8 Finance Street, Hong Kong. Ms. Rong Lu’s business address is Room 1804, No. 15th Building, LujiangStreet, Siddhi Nan Li, Simin District, Xiamen City, Fujian Province, People’s Republic of China. Mr. Brian Hongdi Gu’s business address is 3/F, BuildingB7, No. 11, Kaiyuan Road, High-tech Industrial Development Zone, Guangzhou, People’s Republic of China. Mr. Dou Shen’s business address is BaiduCampus, No. 10 Shangdi 10th Street, Haidian District, Beijing, People’s Republic of China. † For each person and group included in this column, percentage ownership is calculated by dividing the number of ordinary shares beneficially owned bysuch person or group by the sum of the total number of ordinary shares outstanding, which is 880,678,805 on as of February 28, 2019. †† For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by suchperson or group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitledto one vote per share and each holder of our Class B ordinary shares is entitled to ten votes per share on all matters submitted to them for a vote. OurClass A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of our shareholders, except as mayotherwise be required by law. Our Class B ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-onebasis. (1) Represents (i) 40,809,861 Class B ordinary shares directly held by Xin Gao Group Limited, a British Virgin Islands company beneficially owned byMr. Kun Dai through a trust and of which Mr. Kun Dai is the sole director, (ii) 17,276,410 Class A ordinary shares directly held by Gao Li Group Limited,a British Virgin Islands company wholly owned by Mr. Dai and of which Mr. Kun Dai is the sole director, (iii) 61,129,800 Class A ordinary sharesdirectly held by Kingkey New Era Auto Industry Global Limited, a British Virgin Islands company, and (iv) 14,764,090 Class A ordinary shares directlyheld by BOCOM International Supreme Investment Limited, a British Virgin Islands company, as reported on the Schedule 13G filed by Mr. Dai, amongothers, on February 11, 2019. Mr. Kun Dai, together with Mr. Jiarong Chen and JenCap UX III, jointly decides the disposal of Uxin Limited sharesdirectly held by Kingkey New Era Auto Industry Global Limited, and is deemed to be the beneficial owner of all shares of Uxin Limited held by KingkeyNew Era Auto Industry Global Limited. Mr. Kun Dai, together with Mr. Jiarong Chen and JenCap UX, jointly controls the voting power of all shares ofUxin Limited held by BOCOM International Supreme Investment Limited, and is deemed to be the beneficial owner of all shares of Uxin Limited heldby BOCOM International Supreme Investment Limited. For further details on Kingkey New Era Auto Industry Global Limited and BOCOMInternational Supreme Investment Limited, please see footnote (7) below. For further details on JenCap UX III and JenCap UX, please see footnote(3) below. The registered office of Xin Gao Group Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.The registered office of Gao Li Group is OMC Chambers, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. The registered office of KingkeyNew Era Auto Industry Global Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands. Theregistered office of BOCOM International Supreme Investment Limited is Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands. To our knowledge, as of February 28, 2019, a total of 93,170,300 Class A ordinary shares beneficially owned by Mr. Kun Dai through Gao Li GroupLimited, Kingkey New Era Auto Industry Global Limited and BOCOM International Supreme Investment Limited, representing 2.0%, 6.9%, and 1.7% ofoutstanding ordinary shares of Uxin Limited, respectively, had been pledged to third-party lenders in connection with certain loan agreements enteredinto in 2017 in an aggregate principal amount of approximately US$213.1 million, most proceeds of which were used to fund the purchase of shares inour company in the latest rounds of pre-IPO equity financings and which will become due and payable in June, November and December 2019.Assuming all these pledged shares have been sold or otherwise disposed of pursuant to the enforcement of the share pledges, Mr. Kun Dai would havebeneficially owned 4.6% of our outstanding ordinary shares, representing 32.7% of our total voting power, as of February 28, 2019. (2) Represents 40,809,861 ordinary shares, all of which are directly held by Xin Gao Group Limited, a British Virgin Islands company wholly owned byMr. Kun Dai. The registered office of Xin Gao Group Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British VirginIslands. (3) Represents (i) 8,737,788 Class A Ordinary Shares held by Jeneration Capital Master Fund, a company incorporated in Cayman Islands, (ii) 42,336,300Class A Ordinary Shares beneficially owned by Jeneration Capital Partners L.P., a company incorporated in Cayman Islands, comprising 27,572,210Class A ordinary shares directly held by JenCap UX, a company incorporated in Cayman Islands, and 14,764,090 Class A Ordinary Shares directly heldby BOCOM International Supreme Investment Limited, a company incorporated in British Virgin Islands, (iii) 16,872,900 Class A ordinary shares heldby JenCap UX II Plus LLC., a limited liability company formed in the State of Delaware, United States, and (iv) 61,129,800 Class A ordinary sharesindirectly held by JenCap UX III through Kingkey New Era Auto Industry Global Limited, a British Virgin Islands company, as reported on the Schedule13G filed by JenCap UX, among others, on February 11, 2019. JenCap UX III, an exempted company incorporated in Cayman Islands, indirectly holds18.48% of shares in Kingkey New Era Auto Industry Global Limited through First Tycoon Ventures Limited which holds 56% of shares in Kingkey NewEra Auto Industry Global Limited. Mr. Kun Dai, Mr. Jiarong Chen and JenCap UX III jointly decide the disposal of Uxin Limited shares directly held byKingkey New Era Auto Industry Global Limited, and each of them is deemed to be the beneficial owner of all shares of Uxin Limited held by KingkeyNew Era Auto Industry Global Limited. Mr. Kun Dai, Mr. Jiarong Chen and JenCap UX, ultimately controlled by Mr. Jimmy Ching-Hsin Chang, jointlycontrol the voting power of all shares held by BOCOM International Supreme Investment Limited, and each of them is deemed to be the beneficial ownerof all shares of Uxin Limited held by BOCOM International Supreme Investment Limited. For further details on Kingkey New Era Auto Industry GlobalLimitedand BOCOM International Supreme Investment Limited, please see footnote (7) below. JenCap UX is wholly owned by Jeneration CapitalPartners L.P., of which Jeneration Capital GP is the general partner. Jeneration Capital GP is ultimately wholly owned by Jimmy Ching-Hsin Chang.JenCap UX II Plus LLC is wholly owned by JenCap UX II, of which the management shareholder that controls the voting thereof is Jeneration CapitalManagement, an exempted company incorporated in Cayman Islands, which is ultimately controlled by Jimmy Ching-Hsin Chang. The managementshareholder which controls the voting of JenCap UX III is also Jeneration Capital Management. Each of JenCap UX, JenCap UX II Plus LLC and JenCapUX III is unaffiliated with Mr. Kun Dai and Mr. Jiarong Chen. The registered office of JenCap UX is Maples Corporate Services Limited, PO Box 309,Ugland House, Grand Cayman KY1-1104, Cayman Islands. The registered office of JenCap UX II Plus LLC is 2711 Centerville Road, Suite 400,Wilmington, Delaware, New Castle County, USA. The above is based on the Schedule 13G filed by JenCap UX, among others, on February 11, 2019. 116Table of Contents (4) Represents 112,197,310 Class A ordinary shares directly held by Redrock Holding Investments Limited, a company incorporated in British VirginIslands, as reported on the Schedule 13G filed by Redrock Holding Investments Limited, among others, on February 14, 2019. Redrock HoldingsInvestments Limited is owned by Warburg Pincus Private Equity XI, L.P., a Delaware limited partnership, Warburg Pincus Private Equity XI-B, L.P., aDelaware limited partnership, Warburg Pincus Private Equity XI-C, L.P., a Cayman Islands exempted limited partnership, Warburg Pincus XI (Asia), L.P.,a Cayman Islands exempted limited partnership, Warburg Pincus XI Partners, L.P., a Delaware limited partnership, and WP XI Partners, L.P., a Delawarelimited partnership. Warburg Pincus LLC, a New York limited liability company, is the manager of Warburg Pincus Private Equity XI, L.P., WarburgPincus Private Equity XI-B, L.P., Warburg Pincus Private Equity XI-C, L.P., Warburg Pincus XI (Asia), L.P., Warburg Pincus XI Partners, L.P., and WP XIPartners, L.P. The general partner of Warburg Pincus Private Equity XI (Asia), L.P., Warburg Pincus Private Equity XI-B, L.P., Warburg Pincus XI Partnersand WP XI Partners is Warburg Pincus XI, L.P., a direct subsidiary of Warburg Pincus & CO, a New York general partnership and the general partner ofWarburg Pincus XI, L.P. Charles R. Kaye and Joseph P. Landy are the managing general partners of Warburg Pincus & Co., and the ultimate generalpartners of Warburg Pincus Private Equity XI-C, L.P. and Warburg Pincus XI (Asia), L.P. Charles R. Kaye and Joseph P. Landy disclaim beneficialownership of all shares held by Warburg Pincus entities mentioned herein. The registered office of Redrock Holding Investments Limited is P.O. Box3340, Road Town, Tortola, British Virgin Islands. The above is based on the Schedule 13G filed by Redrock Holding Investments Limited, amongothers, on February 14, 2019. (5) Represents 79,832,280 Class A ordinary shares directly held by Baidu (Hong Kong) Limited, as reported on the Schedule 13G filed by Baidu (HongKong) Limited, among others, on February 1, 2019. Baidu (Hong Kong) Limited is incorporated in Hong Kong and wholly owned by Baidu, Inc., apublic company listed on the Nasdaq Global Select Market. The registered office of Baidu (Hong Kong) Limited is Rooms 2201-03, 22/F, World-WideHouse, 19 Des Voeux Road Central, Hong Kong. The above is based on the Schedule 13G filed by Baidu (Hong Kong) Limited, among others, onFebruary 1, 2019. (6) Represents 77,884,479 Class A ordinary shares in the form of ADSs held by Snow Lake Capital (HK) Limited, as reported on the Schedule 13G filed bySnow Lake Capital (HK) Limited on February 14, 2019. Snow Lake Capital (HK) Limited is incorporated in Hong Kong, Mr. Sean MA, the soleshareholder and control person of Snow Lake Capital (HK) Limited, may be deemed to beneficially own all the Class A Ordinary Shares held by SnowLake Capital (HK) Limited. The above is based on the Schedule 13G filed by Snow Lake Capital (HK) Limited on February 14, 2019. (7) Represents 61,129,800 Class A ordinary shares directly held by Kingkey New Era Auto Industry Global Limited, or Kingkey Global, a British VirginIslands company, and 14,764,090 Class A Ordinary Shares owned by BOCOM International Supreme Investment Limited, or BOCOM, a British VirginIslands company, as reported on the Schedule 13G/A filed by Kingkey Global, among others, on February 13, 2019. The shareholders of Kingkey Globalare First Tycoon Ventures Limited, Excellent Ace Holdings Limited and Mr. Jiarong Chen, holding 56%, 37.33% and 6.67% of Kingkey Global,respectively. Excellent Ace Holdings Limited is wholly owned by Mr. Kun Dai. First Tycoon Ventures Limited is 66.7% and 33.3% held by Sail BestInvestments Limited and JenCap UX III, respectively. Sail Best Investments Limited is wholly owned by Kingkey Investment Group Limited, a companyjointly owned by Mr. Jiarong Chen and Mr. Jiajun Chen. Mr. Kun Dai, Mr. Jiarong Chen and JenCap UX III jointly decide the disposal and voting of theshares of Uxin Limited directly held by Kingkey Global, and each of them is deemed to be the beneficial owner of all the shares of Uxin Limited held byKingkey Global. Mr. Kun Dai, Mr. Jiarong Chen and JenCap UX jointly decide the disposal and voting of the shares of Uxin Limited directly held byBOCOM, and each of them is deemed to be the beneficial owner of all the shares of Uxin Limited held by BOCOM. The registered office of KingkeyGlobal is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands. The registered office of BOCOMInternational Supreme Investment Limited is Craigmuir Chambers, Road Town, Tortola, VG 1110, British Virgin Islands. For further details on JenCapUX III and JenCap UX, please see footnote (3) above. As of February 28, 2019, a total of 75,893,890 Class A ordinary shares directly held by Kingkey Global and BOCOM, representing 6.9%, and 1.7% ofoutstanding ordinary shares of Uxin Limited, respectively, had been pledged to third-party lenders in connection with certain loan agreements enteredinto in 2017 in an aggregate principal amount of approximately US$179.0 million, most proceeds of which were used to fund the purchase of shares inour company in the latest rounds of pre-IPO equity financings and which will become due and payable in November and December 2019. Kingkey New Era Auto Industry Limited, or Kingkey, a British Virgin Islands company, directly held 57,045,450 Class A ordinary shares of UxinLimited immediately after the completion of our initial public offering, and currently does not hold any shares in Uxin Limited after the share transfer asdescribed below. The shareholders of Kingkey are Excellent Ace Holdings Limited and ACME Celestial Limited, which hold 40% and 60% of the sharesin Kingkey, respectively. Excellent Ace Holdings Limited is wholly owned by Mr. Kun Dai. ACME Celestial Limited is 66.7% and 33.3% held byMr. Jiarong Chen and JenCap UX, respectively. Kingkey as borrower pledged 57,045,450 Class A ordinary shares pursuant to a share charge in favor ofCathay Rong IV Limited, a third-party lender, in connection with a loan in the principal amount of US$100.0 million under a facility agreement enteredinto with the lender on October 25, 2017. The enforcement of the pledged shares by the lender upon an event of default is not subject to restrictions inthe lock-up agreement entered into between the shareholder and the underwriters of our initial public offering. After our initial public offering, aconfirmatory security deed relating to the original share charge was entered into by Kingkey as chargor on July 27, 2018 in light of the pledged sharesbeing converted from preferred shares into Class A ordinary shares upon the completion of our initial public offering, and a deed of undertakingsupplementing the original facility agreement was entered into by Kingkey as borrower on September 28, 2018, which added a margin call and top-uprequirement relating to the loan. On December 19, 2018, Cathay Rong IV Limited, as the lender, issued an instruction letter to enforce its securityinterests in the pledged shares, and the pledged shares were transferred by Kingkey to the lender as a result thereof. Cathay Rong IV Limited may hold ordispose of these securities at its discretion, including on the public market, as repayment of the outstanding loan and satisfaction of other obligationsunder the facility agreement. For further details on Cathay Rong IV Limited, please see footnote (10) below. The above is based on the Schedule 13G/A filed by Kingkey Global, among others, on February 13, 2019. (8) Represents 66,750,480 Class A ordinary shares in the form of ADSs held by Hillhouse UX Holdings Limited, as reported on the Schedule 13G filed byHillhouse UX Holdings Limited, among others, on February 14, 2019. Hillhouse UX Holdings Limited is incorporated in British Virgin Islands, whollyowned by Hillhouse Fund II, L.P. Hillhouse Capital Management, Ltd. acts as the sole management company of Hillhouse Fund II, L.P. Mr. Lei Zhangmay be deemed to have controlling power over Hillhouse Capital Management, Ltd. Mr. Lei Zhang disclaims beneficial ownership of all of the sharesheld by Hillhouse Fund II, L.P., except to the extent of his pecuniary interest therein. The registered address of Hillhouse UX Holdings Limited is c/oCitco B.V.I. Limited, Flemming House, Wickhams Cay, P.O. Box 662, Road Town, Tortola, British Virgin Islands. The above is based on the Schedule13G filed by Hillhouse UX Holdings Limited, among others, on February 14, 2019. 117Table of Contents (9) Represents (i) 58,795,583 Class A ordinary shares directly held by LC Fund V, L.P., a limited partnership under Cayman Islands law, and (ii) 4,346,615Class A ordinary shares directly held by LC Parallel Fund V, L.P., a limited partnership under Cayman Islands law, as reported on the Schedule 13G filedby LC Fund V, L.P., among others, on January 28, 2019. The general partner of LC Fund V, L.P. and LC Parallel Fund V, L.P. is LC Fund V. GP Limited,which is controlled by Right Lane Limited, a limited liability company incorporated in Hong Kong. Red Lane Limited is directly controlled by LegendHoldings Corporation, a public company listed on Hong Kong Stock Exchange and incorporated in the People’s Republic of China. The registeredoffice of both LC Fund V, L.P. and LC Parallel Fund V, L.P. is P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman KY1-1104, Cayman, Islands. The above is based on the Schedule 13G filed by LC Fund V, L.P., among others, on January 28, 2019. (10) Represents 57,045,450 Class A ordinary shares directly held by Cathay Rong IV Limited, as reported on the Schedule 13D filed by Cathay Rong IVLimited, among others, on December 26, 2018. Cathay Rong acquired 57,045,450 Class A ordinary shares from Kingkey New Era Auto Industry Limitedas a result of foreclosing the shares pledged in connection with a loan in the principal amount of US$100.0 million under a facility agreement enteredinto on October 25, 2017. For further details on the loan and foreclosure, please see footnote (7) above. Cathay Rong IV Limited is a British VirginIslands company wholly owned by China Huarong Macau (HK) Investment Holdings Limited, a company incorporated in Hong Kong. China HuarongMacau (HK) Investment Holdings Limited is a wholly owned subsidiary of China Huarong (Macau) International Company Limited, a companyincorporated in Macau, which is a majority-owned subsidiary of Huarong (HK) Industrial and Financial Investment Limited, a company incorporated inHong Kong. Huarong (HK) Industrial and Financial Investment Limited is a wholly owned subsidiary of Huarong Real Estate Co., Ltd, a companyincorporated in the People’s Republic of China, which is a wholly owned subsidiary of China Huarong Asset Management Co., Ltd., a companyincorporated in the People’s Republic of China. The board of directors of China Huarong Asset Management Co., Ltd. comprises of Wang Zhanfeng, LiXin, Li Yi, Wang Cong, Dai Lijia, Zhou Langlang, Song Fengming, Tse Hau Yin, Liu Lunmin and Shao Jingchun, and Li Xin acts as the chief executiveofficer. The registered office of Cathay Rong IV Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG 1110, BritishVirgin Islands. The address of the principal business office of China Huarong Macau (HK) Investment Holdings Limited is 12th Floor, China HuarongTower, 60 Gloucester Road, Wan Chai, Hong Kong. The address of the principal business office of China Huarong (Macau) International CompanyLimited is 32/F, Bank of China Building, Avenida Doutor Mario Soares, Macau. The address of the principal business office of Huarong (HK) Industrialand Financial Investment Limited is Unit 1503 Causeway Bay Plaza 2, 463-483 Lockhart Road, Hong Kong. The address of the principal business officeof Huarong Real Estate Co., Ltd. is Room 250, East Building, No. 30 Tianhe Street, Hengqing, Zhuhai, Guangdong, the People’s Republic of China. Theaddress of the principal office of China Huarong Asset Management Co., Ltd. is No. 8 Financial Street, Xicheng District, Beijing, the People’s Republicof China. The above is based on the Schedule 13D filed by Cathay Rong IV Limited, among others, on December 26, 2018. (11) Represents 57,000,000 Class A ordinary shares beneficially owned by Tiger Global Private Investment Partners VIII, L.P. and other entities andindividuals affiliated with Tiger Global Management, LLC, as reported on the Schedule 13G filed by Tiger Global Private Investment Partners VIII, L.P.,among others, on February 14, 2019. Tiger Global Management, LLC is controlled by Chase P. Coleman III, Scott Shleifer and Lee Fixel. The businessaddress for each of these entities and individuals is c/o Tiger Global Management, LLC, 9 West 57th Street, 35th Floor, New York, NY 10019. The aboveis based on the Schedule 13G filed by Tiger Global Private Investment Partners VIII, L.P., among others, on February 14, 2019. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one voteper share, while holders of Class B ordinary shares are entitled to ten votes per share. Holders of Class A and Class B ordinary shares vote together as one classon all matters subject to a shareholders’ vote. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof,while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. See “Item 10. Additional Information—B.Memorandum and Articles of Association” for a more detailed description of our Class A ordinary shares and Class B ordinary shares. As of February 28, 2019, 880,678,805 of our ordinary shares were issued and outstanding. To our knowledge, a total of 561,459,870 Class Aordinary shares were held by two record holders in the United States, representing approximately 63.8% of our total outstanding ordinary shares (includingthe 27,000,000 Class A ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting ofawards granted under our share incentive plans). One of these holders is The Bank of New York Mellon, the depositary of our ADS program. The number ofbeneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. Except for the above, we are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. Item 7. Major Shareholders and Related Party Transactions A. Major Shareholders Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” 118Table of Contents B. Related Party Transactions Contractual Arrangements with Our Variable Interest Entities and Their Shareholders PRC laws and regulations currently limit foreign ownership of companies that engage in a value-added telecommunications service business or thedistribution of media products in China. Due to these restrictions, we operate our relevant business through contractual arrangements between Youxinpai,Yougu and Youxin Lubao, our PRC subsidiaries, Youxin Hulian, Yishouche, and Fengshun Lubao, our variable interest entities, and our variable interestentities’ respective shareholders. For a description of these contractual arrangements, see “Item 4.C. Information on the Company—Organizational Structure.” Shareholder Agreements and Registration Rights We entered into our fourteenth amended and restated shareholders’ agreement on January 2, 2018 with our then-existing shareholders. Pursuant tothis shareholders’ agreement, we have granted certain registration rights to preferred shareholders. Set forth below is a description of the registration rightsgranted under the agreement. Demand Registration Rights. At any time after the date that is six months after the completion of our initial public offering in June 2018, holdersof 30% or more of voting power of the outstanding preferred shares or ordinary shares issued upon the conversion of the preferred shares have the right torequest us effect a registration for their shares. Except for certain circumstances where we are entitled to defer a filing, upon receiving a notice of demandregistration, we should promptly give a written notice to all other holders of preferred shares or ordinary shares issued upon the conversion of our preferredshares, and make best efforts to register the shares requested to be registered. We are not obligated to effect more than three demand registrations that havebeen declared and ordered effective. Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must afford preferredshareholders or holders of ordinary shares issued upon the conversion of preferred shares an opportunity to participate in that offering. We have the right toterminate or withdraw any registration initiated by us under the piggyback registration rights prior to the effectiveness of such registration. In case of anunderwritten offering, the underwriters have the right to exclude the shares requested to be registered in the initial public offering on a pro rata basis, up to70% of the shares requested to be registered by the holders of piggyback registration rights, subject to certain preconditions. Form F-3 Registration Rights. Any holders of series A preferred shares or ordinary shares issued upon the conversion of preferred shares mayrequest us to file an unlimited number of registration statements on Form F-3. We should promptly give a written notice to all other preferred shareholders, Termination of Obligations. The registration rights shall terminate: (i) on the fifth anniversary of the completion of our initial public offering,(ii) upon the termination, liquidation, dissolution of our company, or (iii) if and when in the opinion of our counsel, all such registrable securities proposed tobe sold by a shareholder may be sold without registration in any ninety day period pursuant to Rule 144 promulgated under the Securities Act, provided thatsuch counsel is qualified to and experienced in practicing U.S. securities regulations, and we shall provide such opinion of our counsel to the shareholder. Loans to Related Parties On May 13, 2015, we entered into a loan agreement with Xin Gao Group Limited, one of our shareholders controlled by Mr. Kun Dai, our founder,chairman and chief executive officer, and loaned US$17.7 million to Xin Gao Group Limited with a term of five years bearing interest of 6% per annum. Alloutstanding principal and accrued interest under this loan agreement were repaid in full on May 28, 2018. On July 19, 2017, we entered into a loan agreement with Gao Li Group Limited, one of our shareholders controlled by Mr. Kun Dai, and loanedUS$56.5 million to Gao Li Group Limited with a term of five years bearing interest of 6% per annum. All outstanding principal and accrued interest underthis loan agreement were repaid in full on May 28, 2018. 119Table of Contents On July 19, 2017, we entered into a loan agreement with Mr. Kun Dai, and loaned US$22.8 million to Mr. Kun Dai with a term of five years bearinginterest of 6% per annum. All outstanding principal and accrued interest under this loan agreement were repaid in full on May 28, 2018. On December 17, 2017, we entered into a loan agreement with Mr. Kun Dai, and subsequently loaned US$10.7 million to Mr. Kun Dai with a term offive years bearing interest of 6% per annum. All outstanding principal and accrued interest under this loan agreement were repaid in full on May 28, 2018. On May 28, 2018, Xin Gao Group Limited surrendered 19,226,040 ordinary shares, 3,313,980 Series A preferred shares and 8,424,970 Series C-1preferred shares in the company to us to repay all of the outstanding principal and accrued interest owed to us by Xin Gao Group Limited, Gao Li GroupLimited and Mr. Kun Dai in an aggregate amount of approximately US$114.0 million. The number of shares surrendered was calculated based on anestimated settlement price of US$3.68069 per share, which was the purchase price in our last round of preferred shares financing prior to our initial publicoffering. We also agreed with Xin Gao Group Limited and Mr. Kun Dai that if the offering price per ordinary share in our initial public offering was lowerthan the estimated settlement price, we would have the right to unilaterally redeem and cancel additional shares beneficially owned by Mr. Kun Dai so thatthe value of the total shares surrendered and cancelled will be equal to the total loan amount owed to us based on the final price of our initial public offering.As a result, 7,025,849 additional ordinary shares held by Xin Gao Limited were further surrendered immediately prior to the completion of our initial publicoffering in June 2018. Transactions with Baidu In 2016 and 2017, Baidu (Hong Kong) Limited, or Baidu, one of our shareholders, provided advertising and user acquisition services to us at arm’slength in the amount of RMB16.4 million and RMB0.8 million, respectively. As of December 31, 2017, we had an amount of RMB0.8 million due fromBaidu, representing the unsettled balance of our prepaid service fees to Baidu. As of December 31, 2018, the remaining balance due from Baidu was nil. Transactions with Baogu In 2016 and 2017, Baogu Automobile Technology Services (Beijing) Co., or Baogu, provided warranty services to our customers in the amount ofRMB7.3 million and RMB10.7 million, respectively. As of December 31, 2018, the remaining balance due from Baogu was nil as Baogu became our whollyowned subsidiary in August 2017. Transactions with Xiao Qing In September 2015, we invested RMB5.0 million in Shanghai Xiao Qing Information Technology Co., Ltd., or Xiao Qing, an associate of ourcompany, for certain equity interests in Xiao Qing. In October 2016, we withdrew our investment in Xiao Qing, and as of December 31, 2018, the remainingbalance due from Xiao Qing was nil. In 2016 and 2017, Xiao Qing provided repair and maintenance inspection services to us in the amount of RMB3.5 million and RMB1.5 million,respectively. Xiao Qing did not provide any services to us in 2018. Share Conversion Agreement with Fairlubo’s shareholders On June 8, 2018, we entered into an amended and restated share conversion agreement with the Fairlubo shareholders who have the right to converttheir shares in Fairlubo into the shares of our company under the Fairlubo shareholders’ agreement. Pursuant to the share conversion agreement, the Fairluboshareholders agree that, concurrently with the completion of our initial public offering, all their shares in Fairlubo will be converted into such number ofClass A ordinary shares of our company that is equal to the quotient of the value of the Fairlubo shares at the time divided by the public offering price of thisoffering. The Fairlubo shareholders have agreed with us that the value of the Fairlubo shares at the time shall be the higher of (i) the value of the Fairluboshares as determined by an independent appraiser jointly approved by certain shareholders holding at least two-thirds of the issued and outstanding series Bpreferred shares of Fairlubo, and (ii) the total investment amount paid by the Fairlubo shareholders plus an internal return rate of 50% per annum calculatedfrom January 21, 2016, the date of their investment, to June 1, 2018, which amounts to approximately US$39.1 million in the aggregate. Upon thecompletion of our initial public offering in June 2018, we issued 13,026,713 Class A ordinary shares to certain Fiarlubo shareholders at the initial publicoffering price of US$9.00 per ADS as a result of the share conversion. 120Table of Contents Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B. Compensation.” Share Incentives See “Item 6. Directors, Senior Management and Employees—B. Compensation.” C. Interests of Experts and Counsel Not applicable. Item 8. Financial Information A. Consolidated Statements and Other Financial Information We have appended consolidated financial statements filed as part of this annual report. Legal Proceedings We and certain of our current and former directors have been named as defendants in five putative securities class actions filed in the Supreme Courtof the State of New York between January 22 and January 31, 2019. On February 28, 2019, the parties in the state court actions entered into a stipulation toconsolidate all these actions before the Court. These cases are: · Mark Lee v. Uxin Limited et al, Index No. 650427/2019 (Sup. Ct. N.Y. Cty.); · Lei Liang v. Uxin Limited et al, Index No. 650509/2019 (Sup. Ct. N.Y. Cty.); · Adam Franchie v. Uxin Limited et al, Index No. 650604/2019 (Sup. Ct. N.Y. Cty.); · Raul Araujo v. Uxin Limited et al, Index No. 650613/2019 (Sup. Ct. N.Y. Cty.); · Daniel Chiu v. Uxin Limited et al, Index No. 650633/2019 (Sup. Ct. N.Y. Cty.). In addition, on February 11, 2019, a sixth complaint, Machniewicz v. Uxin Limited et al, Case No. 1:19-cv-00822 (E.D.N.Y.), was filed in the UnitedStates District Court for the Eastern District of New York. All these cases were purportedly brought on behalf of a class of persons who allegedly suffered damages as a result of alleged misstatements andomissions in certain disclosure documents in connection with our initial public offering in June 2018. These actions remain in preliminary stages. For risksand uncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have been named as a defendant in a putative shareholder class action lawsuit that could have a material adverse impact on our business, financialcondition, results of operation, cash flows and reputation.” We may also from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business.Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources,including our management’s time and attention. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may besubject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have a material adverseeffect on our business, results of operations and financial condition.” 121Table of Contents Dividend Policy Our board of directors has discretion on whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, ourshareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. In either case,all dividends are subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium,and provided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in theordinary course of business. Even if we decide to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capitalrequirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. We have not declared or paid any dividends on our ordinary shares, nor do we have any present plan to pay any cash dividends on our ordinaryshares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand ourbusiness. We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements,including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “Item 4.Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Dividend Distribution.” Ifwe pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying our ADSs to thedepositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to ordinaryshares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See“Item 12. Description of Securities Other than Equity Securities—D. American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paidin U.S. dollars. B. Significant Changes Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidatedfinancial statements included in this annual report. Item 9. The Offer and Listing A. Offering and Listing Details Our ADSs, each representing three of our Class A ordinary shares, have been listed on Nasdaq since June 27, 2018. Our ADSs trade under the symbol“UXIN.” B. Plan of Distribution Not applicable. C. Markets Our ADSs have been listed on Nasdaq since June 27, 2018 under the symbol “UXIN.” D. Selling Shareholders Not applicable. E. Dilution Not applicable. 122Table of Contents F. Expenses of the Issue Not applicable. Item 10. Additional Information A. Share Capital Not applicable. B. Memorandum and Articles of Association We are a Cayman Islands exempted company with limited liability and our affairs are governed by our memorandum and articles of association, asamended and restated from time to time, and the Companies Law (2018 Revision) of the Cayman Islands, which is referred to as the Companies Law below,and the common law of the Cayman Islands. The following are summaries of material provisions of our current memorandum and articles of association, insofar as they relate to the materialterms of our ordinary shares. Registered Office and Objects Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at P.O. Box 309, Ugland House, GrandCayman, KY1-1104, Cayman Islands, or at such other location within the Cayman Islands as our board of directors may from time to time decide. The objectsfor which our company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law, asamended from time to time, or any other law of the Cayman Islands. Board of Directors See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” Ordinary Shares Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class A ordinary shares and Class Bordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued in registered form and are issued whenregistered in our register of shareholders. We may not issue shares to bearer. Our shareholders who are non-residents of the Cayman Islands may freely holdand vote their shares. Conversion Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are notconvertible into Class B ordinary shares under any circumstances. Upon (i) any direct or indirect sale, transfer, assignment or disposition of Class B ordinaryshares by a holder thereof or the direct or indirect transfer or assignment of the voting power attached to such number of Class B ordinary shares throughvoting proxy or otherwise to any person or entity that is not an Affiliate (as defined in our memorandum and articles of association) of such holder, or (ii) thedirect or indirect sale, transfer, assignment or disposition of a majority of the issued and outstanding voting securities of, or the direct or indirect transfer orassignment of the voting power attached to such voting securities through voting proxy or otherwise, or the direct or indirect transfer, sale, assignment ordisposition of all or substantially all of the assets of a holder of Class B ordinary shares that is an entity to any person or entity that is not an Affiliate of suchholder, such Class B ordinary shares will be automatically and immediately converted into an equal number of Class A ordinary shares. 123Table of Contents Dividends The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors, subject to our memorandum andarticles of association. Our amended memorandum and restated articles of association provide that dividends may be declared and paid out of our profits,realized or unrealized, or from any reserve set aside from profits which our board of directors determine is no longer needed. Dividends may also be declaredand paid out of share premium account or any other fund or account which can be authorized for this purpose in accordance with the Companies Law. Underthe laws of the Cayman Islands, our company may pay a dividend out of either our profit or share premium account, provided that in no circumstances may adividend be paid if, immediately after this payment. This would result in our company being unable to pay its debts as they fall due in the ordinary course ofbusiness. Dividends received by each Class B ordinary share and Class A ordinary share in any dividend distribution shall be the same. Voting Rights Our Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of our shareholders, exceptas may otherwise be required by law or provided for in our memorandum and articles of association. In respect of matters requiring shareholders’ vote, eachClass A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to ten votes. Voting at any shareholders’ meeting is by show ofhands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than10% of the votes attaching to the total ordinary shares which are present in person or by proxy at the meeting. An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to theordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while a special resolution requires theaffirmative vote of no less than two-thirds of the votes cast attaching to the outstanding ordinary shares cast by those shareholders entitled to vote who arepresent or by proxy at a general meeting. Both ordinary resolutions and special resolutions may also be passed by a unanimous written resolution signed byall the shareholders of our company, as permitted by the Companies Law and our memorandum and articles of association. A special resolution will berequired for important matters such as a change of name or making changes to our memorandum and articles of association. Holders of the ordinary sharesmay, among other things, divide or combine their shares by ordinary resolution. General Meetings of Shareholders As a Cayman Islands exempted company, we are not obliged by the Companies Law to call shareholders’ annual general meetings. Ourmemorandum and articles of association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting inwhich case we shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may bedetermined by our directors. Shareholders’ general meetings may be convened by a majority of our board of directors. Advance notice of at least seven (7) calendar days isrequired for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders. A quorum required for anygeneral meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third of all votes attaching to theissued and outstanding shares in our company entitled to vote at general meetings. The Companies Law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with anyright to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our memorandum andarticles of association provide that upon the requisition of shareholders representing in aggregate not less than a majority of all votes attaching to the issuedand outstanding shares of our company entitled to vote at general meetings, our board is obliged to call an extraordinary general meeting and put theresolutions so requisitioned to a vote at such meeting. However, our memorandum and articles of association do not provide our shareholders with any rightto put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders. 124Table of Contents Transfer of Ordinary Shares Subject to the restrictions in our memorandum and articles of association as set out below, any of our shareholders may transfer all or any of his orher ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors. Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which wehave a lien. Our board of directors may also decline to register any transfer of any ordinary share unless: · the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence asour board of directors may reasonably require to show the right of the transferor to make the transfer; · the instrument of transfer is in respect of only one class of ordinary shares; · the instrument of transfer is properly stamped, if required; and · in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four. · a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors may from time totime require is paid to us in respect thereof. If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to eachof the transferor and the transferee notice of such refusal. The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and the register closedat such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not besuspended nor the register closed for more than 30 days in any year as our board may determine. Liquidation On a return of capital or the winding up of our company, if the assets available for distribution amongst our shareholders shall be more thansufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders inproportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of whichthere are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all ofthe paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to the par value of the shares held by them. Calls on Shares and Forfeiture of Shares Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to suchshareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject toforfeiture. Redemption, Repurchase and Surrender of Shares We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these shares, on such termsand in such manner as may be determined by our board of directors or by the shareholders by special resolution. Our Company may also repurchase any ofour shares on such terms and in such manner as have been approved by our board of directors or by an ordinary resolution of our shareholders. Under theCompanies Law, the redemption or repurchase of any share may be paid out of our Company’s profits or out of the proceeds of a new issue of shares made forthe purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if our company can,immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Law no such sharemay be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding or (c) ifour company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration. 125Table of Contents Variations of Rights of Shares If at any time, our share capital is divided into different classes or series of shares, the rights attached to any class or series of shares (unless otherwiseprovided by the terms of issue of the shares of that class or series), whether or not our company is being wound-up, may be varied with the consent in writingof all the holders of the issued shares of that class or series or with the sanction of an ordinary resolution passed at a separate meeting of the holders of theshares of the class or series. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the termsof issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares. Issuance of Additional Shares Our memorandum of association authorize our board of directors to issue additional Class A ordinary shares from time to time as our board ofdirectors shall determine, to the extent of available authorized but unissued shares. Our memorandum of association also authorize our board of directors to establish from time to time one or more series of preference shares and todetermine, with respect to any series of preference shares, the terms and rights of that series, including: · the designation of the series; · the number of shares of the series; · the dividend rights, dividend rates, conversion rights, voting rights; and · the rights and terms of redemption and liquidation preferences. Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these sharesmay dilute the voting power of holders of Class A ordinary shares. Inspection of Books and Records Holders of our Class A ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders orour corporate records. However, we will provide our shareholders with annual audited financial statements. Anti-Takeover Provisions Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company ormanagement that shareholders may consider favorable, including provisions that: · authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges andrestrictions of such preference shares without any further vote or action by our shareholders; and · limit the ability of shareholders to requisition and convene general meetings of shareholders. 126Table of Contents However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum and articles ofassociation for a proper purpose and for what they believe in good faith to be in the best interests of our company. Exempted Company We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between ordinary residentcompanies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands mayapply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except thatan exempted company: · does not have to file an annual return of its shareholders with the Registrar of Companies; · is not required to open its register of members for inspection; · does not have to hold an annual general meeting; · may issue negotiable or bearer shares or shares with no par value; · may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance); · may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands; · may register as a limited duration company; and · may register as a segregated portfolio company. “Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of our company(except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or othercircumstances in which a court may be prepared to pierce or lift the corporate veil). Changes in Capital Our shareholders may from time to time by ordinary resolution: · increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe; · consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares; · sub-divide our existing shares, or any of them into shares of a smaller amount, provided that in the subdivision the proportion between theamount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case of the share from which the reduced shareis derived; or · cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish theamount of our share capital by the amount of the shares so cancelled. 127Table of Contents Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by our company foran order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner permitted by law. Register of Members Under Companies Law, we must keep a register of members and there should be entered therein: · the names and addresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered aspaid, on the shares of each member; · the date on which the name of any person was entered on the register as a member; and · the date on which any person ceased to be a member. Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of memberswill raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members should be deemed as amatter of Cayman Islands law to have legal title to the shares as set against its name in the register of members. Once our register of members has beenupdated, the shareholders recorded in the register of members will be deemed to have legal title to the shares set against their name in the register of members. If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in enteringon the register the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or ourcompany itself) may apply to the Grand Court of the Cayman Islands for an order that the register be rectified, and the Court may either refuse suchapplication or it may, if satisfied of the justice of the case, make an order for the rectification of the register. C. Material Contracts Other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or “Item 7. MajorShareholders and Related Party Transactions—B. Related Party Transactions” or elsewhere in this annual report, we have not entered into any materialcontract during the two years immediately preceding the date of this annual report. D. Exchange Controls See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange.” E. Taxation The following summary of the principal Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or ordinaryshares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summarydoes not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under U.S. state andlocal tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic of China and the United States. Cayman Islands Taxation The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is notaxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us or our shareholders levied by the government of theCayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution, brought within the jurisdiction of theCayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made by our company. There are noexchange control regulations or currency restrictions in the Cayman Islands. 128Table of Contents Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman Islands and nowithholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or the ADSs, nor will gains derived from thedisposal of our ordinary shares or the ADSs be subject to Cayman Islands income or corporation tax. People’s Republic of China Taxation Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto managementbody” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. Theimplementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of thebusiness, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known asCircular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that isincorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups,not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general positionon how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, anoffshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “defacto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in thePRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in thePRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained inthe PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. We believe that Uxin Limited is not a PRC resident enterprise for PRC tax purposes. Uxin Limited is not controlled by a PRC enterprise or PRCenterprise group and we do not believe that Uxin Limited meets all of the conditions above. Uxin Limited is a company incorporated outside the PRC. As aholding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of itsboard of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our other entities outside ofChina are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities anduncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government willultimately take a view that is consistent with us. If the PRC tax authorities determine that Uxin Limited is a PRC resident enterprise for enterprise income tax purposes, we may be required towithhold a 10% tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-residententerprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or ordinaryshares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including our ADS holders)would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are deemed to be a PRC residententerprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% which in the case of dividends may be withheldat source. Any PRC tax liability may be reduced by an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of Uxin Limitedwould be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that Uxin Limited is treated as a PRCresident enterprise. 129Table of Contents Provided that our Cayman Islands holding company, Uxin Limited, is not deemed to be a PRC resident enterprise, holders of our ADSs and ordinaryshares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition ofour shares or the ADSs. SAT Public Notice 7 further clarifies that, if a non-resident enterprise derives income by acquiring and selling shares in an offshorelisted enterprise in the public market, such income will not be subject to PRC tax. However, there is uncertainty as to the application of SAT Public Notice 7,we and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Public Notice 7 and we may be required toexpend valuable resources to comply with SAT Public Notice 7 or to establish that we should not be taxed under SAT Public Notice 7. Under SAT Circular 7,where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC residententerprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee orthe PRC entity which directly owned such taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form”principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and wasestablished for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterpriseincome tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10%for the transfer of equity interests in a PRC resident enterprise. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC shareholders.” United States Federal Income Taxation The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of the ADSsor Class A ordinary shares by a U.S. Holder (as defined below) that holds the ADSs or Class A ordinary shares as “capital assets” (generally, property held forinvestment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing U.S. federal tax law, which issubject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the IRS with respect to any U.S. federal incometax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion, moreover, does notaddress the U.S. federal estate, gift, and alternative minimum tax considerations, Medicare tax on certain net investment or any state, local and non-U.S. taxconsiderations, relating to the ownership or disposition of the ADSs or Class A ordinary shares. The following summary does not address all aspects of U.S.federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as: · banks and other financial institutions; · insurance companies; · pension plans; · cooperatives; · regulated investment companies; · real estate investment trusts; · broker-dealers; · traders that elect to use a mark-to-market method of accounting; · certain former U.S. citizens or long-term residents; · tax-exempt entities (including private foundations); · holders who acquire their ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as compensation; 130Table of Contents · investors that will hold their ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integratedtransaction for U.S. federal income tax purposes; · investors that have a functional currency other than the U.S. dollar; · persons that actually or constructively own 10% or more of the total combined voting power or value of our stock; or · partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or Class A ordinary sharesthrough such entities, all of whom may be subject to tax rules that differ significantly from those discussed below. Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular circumstances, and thestate, local, non-U.S. and other tax considerations of the ownership and disposition of the ADSs or Class A ordinary shares. General For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for U.S. federal income taxpurposes: · an individual who is a citizen or resident of the United States; · a corporation (or other entity subject to tax as a corporation for U.S. federal income tax purposes) created in, or organized under the law of theUnited States or any state thereof or the District of Columbia; · an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or · a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have theauthority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a U.S. person under the Code. If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs or Class A ordinaryshares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnershipsholding the ADSs or Class A ordinary shares and their partners are urged to consult their tax advisors regarding an investment in the ADSs or Class A ordinaryshares. The discussion below assumes that the representations contained in the deposit agreement and any related agreement are true and that theobligations in such agreements will be complied with in accordance with their terms. Accordingly for U.S. federal income tax purposes, it is generallyexpected that a U.S. Holder of ADSs will be treated as the beneficial owner of the underlying Class A ordinary shares represented by the ADSs, and thereforedeposits or withdrawals of Class A ordinary shares for ADSs will generally not be subject to U.S. federal income tax. Passive Foreign Investment Company Considerations A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year, if either (i) 75%or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (based on an average of thequarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). Aseparate determination must be made after the close of each taxable year as to whether a non-United States corporation is a PFIC for that year. Passive incomegenerally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreigncurrency gains. 131Table of Contents For this purpose, cash and assets readily convertible into cash are categorized as passive assets and the company’s goodwill associated with active businessactivity is taken into account as a non-passive asset. In addition, a non-U.S. corporation will be treated as owning its proportionate share of the assets and earning its proportionate share of the income ofany other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock. Although the law in this regard is not entirely clear, wetreat our VIEs as being owned by us for U.S. federal income tax purposes because we control the management decisions and are entitled to substantially all ofthe economic benefits associated with these entities. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financialstatements. If it were determined, however, that we are not the owner of the VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for thecurrent taxable year and any subsequent taxable year. Even assuming that we are the owner of the VIEs for U.S. federal income tax purposes, it is possible that certain portions of our income from andassets used to generate our loan facilitation revenue may be treated as passive under the PFIC provisions. In such event, based on our current and expectedincome and assets, and the market value of our ADSs, it is possible that we could be a PFIC for the taxable year ending December 31, 2018 or in theforeseeable future. Based on our interpretation of the facts and the applicable law, we do not presently believe this to be the case. Nevertheless there areuncertainties regarding the nature of parts of our income and the application of the law to those facts, and it is therefore possible that the IRS may challengeour classification of certain portions of our income and assets as non-passive. Accordingly, no assurances can be given that we are not a PFIC for the taxableyear ending December 31, 2018 and will not be a PFIC in the current or future taxable years. Even if we are not currently a PFIC, changes in the nature of ourincome or assets, or fluctuations in the market price of our ADSs and Class A ordinary shares, may cause us to be classified as a PFIC for future taxable years.Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances wherecertain portions of our loan facilitation revenue or revenue from other activities that produce passive income increase relative to our revenue from activitiesthat produce non-passive income or where we determine not to deploy significant amounts of cash for working capital or other purposes, our risk of becomingclassified as a PFIC may substantially increase. If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, the PFIC tax rules discussedbelow under “—Passive Foreign Investment Company Rules” will generally apply to such U.S. Holder for such taxable year and, unless the U.S. Holdermakes certain elections, will apply in future years in respect of such holder even if we cease to be a PFIC. The discussion below under “—Dividends” and “—Sale or Other Disposition” assumes that we are not and will not be or become classified as a PFIC for U.S. federal income tax purposes. Dividends Subject to the discussion below under “—Passive Foreign Investment Company Rules,” any cash distributions (including the amount of any PRCtax withheld) paid on the ADSs or Class A ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income taxprinciples, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S.Holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits onthe basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes.Dividends received on the ADSs or Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporations in respect ofdividends received from U.S. corporations. Individuals and other non-corporate U.S. Holders will be subject to tax at the lower capital gains tax rate applicable to “qualified dividend income,”provided that certain conditions are satisfied, including that (1) the ADSs or Class A ordinary shares on which the dividends are paid are readily tradable onan established securities market in the United States, or, in the event that we are deemed to be a PRC resident enterprise under the PRC tax law, we areeligible for the benefit of the United States-PRC income tax treaty, (2) we are neither a PFIC nor treated as such with respect to a U.S. Holder (as discussedbelow) for the taxable year in which the dividend is paid or the preceding taxable year, (3) certain holding period requirements are met, and (4) such non-corporate U.S. Holders are not under an obligation to make related payments with respect to positions in substantially similar or related property. For thispurpose, ADSs listed on the Nasdaq Global Select Market will generally be considered to be readily tradable on an established securities market in the UnitedStates. Although the law in this regard is not entirely clear, since we do not expect our Class A ordinary shares will be listed on any securities market, we donot believe that Class A ordinary shares that are not represented by ADSs will generally be considered to be readily tradable on an established securitiesmarket in the United States. Each U.S. Holder should consult its tax advisors regarding the availability of the lower rate for dividends paid with respect to theADSs or Class A ordinary shares. 132Table of Contents In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Tax—Enterprise Income Tax”), we may be eligible for the benefits of the United States-PRCincome tax treaty. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented bythe ADSs, and regardless of whether our ADSs are readily tradable on an established securities market in the United States, would be eligible for the reducedrates of taxation applicable to qualified dividend income, as described in the preceding paragraph. For U.S. foreign tax credit purposes, dividends paid on the ADSs or Class A ordinary shares generally will be treated as income from foreign sourcesand generally will constitute passive category income. If PRC withholding taxes apply to dividends paid to you with respect to the ADSs or Class A ordinaryshares, you may be able to obtain a reduced rate of PRC withholding taxes under the United States-PRC income tax treaty if certain requirements are met. Inaddition, subject to certain conditions and limitations, PRC withholding taxes on dividends that are non-refundable under the income tax treaty between theUnited States and the PRC may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. If a U.S. Holder does not elect toclaim a foreign tax credit, such holder may instead claim a deduction for U.S. federal income tax purposes in respect of such withholding, but only for a yearin which such holder elects to do so for all creditable foreign income taxes. Each U.S. Holder should consult its tax advisors regarding the creditability of anyPRC tax. Sale or Other Disposition Subject to the discussion below under “—Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize gain or loss upon thesale or other disposition of our ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition andthe holder’s adjusted tax basis in such ADSs or Class A ordinary shares. The gain or loss will generally be capital gain or loss. Individuals and other non-corporate U.S. Holders who have held the ADS or Class A ordinary shares for more than one year will generally be eligible for reduced tax rates. Thedeductibility of a capital loss may be subject to limitations. Any such gain or loss that the U.S. Holder recognizes will generally be treated as U.S. sourceincome or loss for foreign tax credit limitation purposes, which will generally limit the availability of foreign tax credits. However, in the event we aredeemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be subject to PRC tax upon the disposition of our ADSsor Class A ordinary shares. In such event, if PRC tax were to be imposed on any gain from such disposition, a U.S. Holder that is eligible for the benefits of theUnited States-PRC income tax treaty may elect to treat such gain as PRC source income. Each U.S. Holder should consult its tax advisors regarding thecreditability of any PRC tax. Passive Foreign Investment Company Rules If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, and unless the U.S. Holdermakes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on (i) any excess distribution that wemake to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the averageannual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or Class A ordinary shares), and(ii) any gain realized on the sale or other disposition of ADSs or Class A ordinary shares. Under the PFIC rules: · such excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A ordinary shares; · such amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year inwhich we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income; · such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individualsor corporations, as appropriate, for that year; and · an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than apre-PFIC year. 133Table of Contents If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our subsidiaries, our VIEs orany of the subsidiaries of our VIEs is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to anyof our subsidiaries, our VIEs or any of the subsidiaries of our VIEs. As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election withrespect to such stock. If a U.S. Holder makes this election with respect to the ADSs, the holder will generally (i) include as ordinary income for each taxableyear that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and(ii) deduct as an ordinary loss in each such taxable year the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs heldat the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election.If a U.S. Holder makes a mark-to-market election in respect of the ADSs and we cease to be classified as a PFIC, the holder will not be required to take intoaccount the gain or loss described above during any period that we are not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gainsuch U.S. Holder recognizes upon the sale or other disposition of the ADSs in a year when we are a PFIC will be treated as ordinary income and any loss willbe treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of themark-to-market election. The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market,as defined in applicable United States Treasury regulations. We expect that our ADSs will continue to be listed on the NASDAQ Global Select Market, whichis a qualified exchange for these purposes, and, consequently, assuming that the ADSs are regularly traded , it is expected that the mark-to-market electionwould be available to a U.S Holder of our ADSs if were we to become a PFIC, but no assurances are given in this regard. Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFICrules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal incometax purposes. We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in taxtreatment different from (and generally less adverse than) the general tax treatment for PFICs described above. If a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annual reportcontaining such information as the United States Treasury Department may require. Each U.S. Holder should consult its tax advisors regarding the U.S.federal income tax consequences of owning and disposing of the ADSs or Class A ordinary shares if we are or become a PFIC. F. Dividends and Paying Agents Not applicable. 134Table of Contents G. Statement by Experts Not applicable. H. Documents on Display We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-225266), as amended, including the annual reportcontained therein, to register the issuance and sale of our ordinary shares represented by ADSs in relation to our initial public offering. We have also filedwith the SEC the registration statement on Form F-6 (Registration No. 333-225594) to register the ADSs. We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers, and arerequired to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within four monthsafter the end of each fiscal year, which is December 31. All information filed with the SEC can be obtained over the internet at the SEC’s website atwww.sec.gov or inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can requestcopies of documents, upon payment of a duplicating fee, by writing to the SEC. As a foreign private issuer, we are exempt from the rules under the ExchangeAct prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from thereporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. We will furnish the Bank of New York Mellon, the depositary of the ADSs, with our annual reports, which will include a review of operations andannual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports andcommunications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available toholders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received bythe depositary from us. In accordance with Nasdaq Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our website at http://ir.xin.com. In addition,we will provide hardcopies of our annual report free of charge to shareholders and ADS holders upon request. I. Subsidiary Information Not applicable. Item 11. Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We have not been exposed to material risks due to changes in market interest rates, and we have not used any derivative financial instruments tomanage our interest risk exposure. The fluctuation of interest rates may affect the demand for loan facilitation services on our platform. For example, in the event that market interestrates decrease and if the financing partners with which we cooperate in providing financing solutions on our platform do not adjust the interest rate chargedfor their consumer auto loan products, the potential borrowers may seek lower-priced loans from other channels. A high interest rate environment may lead tohigh interest payments on auto loans facilitated through our platform and a decrease in demand for financing solutions offered on our platform. We do notexpect that the fluctuation of interest rates will have a material impact on our financial condition. However, we cannot provide assurance that we will not beexposed to material risks due to changes in market interest rate in the future. We may invest the net proceeds we receive from our initial public offering and the concurrent private placement of convertible notes in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities mayhave their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interestrates fall. 135Table of Contents Foreign Exchange Risk Substantially all of our revenues and expenses are denominated in RMB. We do not believe that we currently have any significant direct foreignexchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risksshould be limited in general, the value of your investment in our ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because thevalue of our business is effectively denominated in RMB, while our ADSs will be traded in U.S. dollars. The value of the Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and byChina’s foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of theRenminbi to the U.S. dollar, and the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 andJune 2010, this appreciation subsided and the exchange rate between the Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, theRenminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would havean adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose ofmaking payments for dividends on our Class A ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against theRenminbi would have a negative effect on the U.S. dollar amounts available to us. As of December 31, 2018, we had RMB-denominated cash and cash equivalents, restricted cash and short-term investments of RMB2.6 billion, andU.S. dollar-denominated cash balances of US$117.5 million. Assuming we had converted RMB2.6 billion into U.S. dollars at the exchange rate ofRMB6.8755 for US$1.00 as of December 31, 2018, our U.S. dollar cash balance would have been US$378.2 million. If the RMB had depreciated by 10%against the U.S. dollar, our U.S. dollar cash balance would have been US$340.3 million instead. Assuming we had converted US$117.5 million into RMB atthe exchange rate of RMB6.8755 for US$1.00 as of December 31, 2018, our RMB cash balance would have been RMB807.9 million. If the RMB haddepreciated by 10% against the U.S. dollar, our RMB cash balance would have been RMB727.1 million instead. Inflation To date, inflation in the PRC has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2016, 2017 and 2018 were increases of 2.1%, 1.8% and 1.9%, respectively. Although wehave not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation inthe PRC. For example, certain operating costs and expenses, such as employee compensation and office operating expenses may increase as a result of higherinflation. Additionally, because a substantial portion of our assets consists of cash and cash equivalents and short-term investments, high inflation couldsignificantly reduce the value and purchasing power of these assets. We are not able to hedge our exposure to higher inflation in China. Item 12. Description of Securities Other than Equity Securities A. Debt Securities Not applicable. 136Table of Contents B. Warrants and Rights Not applicable. C. Other Securities Not applicable. D. American Depositary Shares Fees and Charges Our ADS holders May Have to Pay An ADS holder will be required to pay the following service fees to the depositary bank and certain taxes and governmental charges (in addition toany applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of the ADSs): Persons depositing or withdrawing Class A ordinary shares orADS holders must pay: For:$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)Issuance of ADSs, including issuances resulting from a distribution ofClass A ordinary shares or rights or other propertyCancellation of ADSs for the purpose of withdrawal, including if the depositagreement terminates $0.05 (or less) per ADSAny cash distribution to ADS holders A fee equivalent to the fee that would be payable if securities distributed toyou had been Class A ordinary shares and the Class A ordinary shares hadbeen deposited for issuance of ADSsDistribution of securities distributed to holders of deposited securities(including rights) that are distributed by the depositary to ADS holders $0.05 (or less) per ADS per calendar yearDepositary services Registration or transfer feesTransfer and registration of Class A ordinary shares on our share register to orfrom the name of the depositary or its agent when you deposit or withdrawClass A ordinary shares Expenses of the depositaryCable and facsimile transmissions (when expressly provided in the depositagreement)Converting foreign currency to U.S. dollars Taxes and other governmental charges the depositary or the custodian has topay on any ADSs or Class A ordinary shares underlying ADSs, such as stocktransfer taxes, stamp duty or withholding taxesAs necessary Any charges incurred by the depositary or its agents for servicing thedeposited securitiesAs necessary Fees and Other Payments Made by the Depositary to Us The depositary has agreed to reimburse us annually for our expenses incurred in connection with investor relationship programs and any otherprogram related to our ADS facility and the travel expense of our key personnel in connection with such programs. The depositary has also agreed to provideadditional payments to us based on the applicable performance indicators relating to our ADS facility. There are limits on the amount of expenses for whichthe depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects frominvestors. In 2018, we received approximately US$4.5 million (after tax) reimbursement from the depositary for our expenses incurred in connection withinvestor relationship programs related to the ADS facility and the travel expense of our key personnel in connection with such programs. 137Table of Contents PART II Item 13. Defaults, Dividend Arrearages and Delinquencies None. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Material Modifications to the Rights of Security Holders None. Use of Proceeds The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-225266) in relation toour initial public offering, which became effective on June 26, 2018. In June 2018, we completed our initial public offering in which we issued and sold anaggregate of 25,000,000 ADSs, representing 75,000,000 Class A ordinary shares, resulting in net proceeds to us of US$204.8 million. Morgan Stanley & Co.International plc, Goldman Sachs (Asia) L.L.C., J.P. Morgan Securities LLC, China International Capital Corporation Hong Kong Securities Limited andChina Renaissance Securities (Hong Kong) Limited were the representatives of the underwriters in our initial public offering. The total of underwritingdiscount and expenses relating to the initial public offering amounted to US$20.2 million. For the period from June 27, 2018 to December 31, 2018, we applied these net proceeds as follows: · approximately US$70 million for improving our transaction service capabilities; · approximately US$46 million for research and development; and · the balance for general corporate purposes, including funding potential strategic investments and acquisitions, although we have not identifiedany specific investments or acquisition opportunities at this time. Item 15. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness ofour disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as requiredby Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our management has concluded that, as of December 31, 2018, our disclosure controls and procedures were effective inensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed,summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reportsthat we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chieffinancial officer, to allow timely decisions regarding required disclosure. 138Table of Contents Management’s Annual Report on Internal Control over Financial Reporting This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation reportby our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Internal Control over Financial Reporting Prior to our initial public offering in June 2018, we were a private company with limited accounting personnel and other resources with which toaddress our internal controls. In connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2016 and2017, we and our independent registered public accounting firm identified two “material weaknesses” in our internal control over financial reporting, asdefined in the standards established by the Public Company Accounting Oversight Board of the United States, and other control deficiencies. A “materialweakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that amaterial misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified related to (i) our lack of adequate number of accounting staff and management resources with appropriateknowledge of U.S. GAAP and SEC reporting and compliance requirements and (ii) insufficient documented financial closing policies and procedures,specifically those related to period end expenses cut-off and accruals. We are in the process of implementing a number of measures to address these material weaknesses identified, including: (i) hire more qualifiedfinancial and reporting personnel, including financial controller, equipped with relevant U.S. GAAP and SEC reporting experiences and qualifications tostrengthen the financial reporting function and to set up financial and system control framework; (ii) implement regular and continuous U.S. GAAPaccounting and financial reporting training programs for our accounting and financial reporting personnel; (iii) set up an internal audit function as well as toengage an external consulting firm to assist us to assess Sarbanes-Oxley compliance readiness and improve overall internal controls, and (iv) establishsufficient and formal financial closing policies and procedures, especially those related to period end cut-off and accruals. We expect that we will incursignificant costs in the implementation of such measures. However, we cannot assure you that we will remediate our material weaknesses in a timely manner.See “Risk Factors—Risks Related to Our Business and Industry— If we fail to develop and maintain an effective system of internal control over financialreporting, we may be unable to accurately report our financial results or prevent fraud.” As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBSAct. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally topublic companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, in theassessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company doesnot need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with suchnew or revised accounting standards. We have not adopted all the new accounting standards that have become effective so far, and we intend to takeadvantage of the extended transition period for complying with new or revised accounting standards provided under the JOBS Act in the future. Changes in Internal Control over Financial Reporting Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by thisannual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 139Table of Contents Item 16A. Audit Committee Financial Expert Our board of directors has determined that Rong Lu, an independent director (under the standards set forth in Nasdaq Stock Market Rule 5605(a)(2) and Rule 10A-3 under the Exchange Act) and member of our audit committee, is an audit committee financial expert. Item 16B. Code of Ethics Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees in June 2018. We haveposted a copy of our code of business conduct and ethics on our website at http://ir.xin.com. Item 16C. Principal Accountant Fees and Services The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered byPricewaterhouseCoopers Zhong Tian LLP, our principal external auditors, for the periods indicated. 2017 2018Audit feesUS$1,836,491US$1,092,785All other feesUS$—US$138,419 (1) “Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for the audit ofour annual financial statements and assistance with and review of documents filed with the SEC. In 2017 and 2018, the audit refers to financial audit. (2) “All other fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors associatedwith certain financial due diligence projects, permissible services to review and comment on internal control design over financial reporting and otheradvisory services. The policy of our audit committee is to pre-approve all audit and non-audit services provided by PricewaterhouseCoopers Zhong Tian LLP,including audit services, audit-related services, tax services and other services as described above, other than those for de minimis services which areapproved by the audit committee prior to the completion of the audit. Item 16D. Exemptions from the Listing Standards for Audit Committees Not applicable. Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 16F. Change in Registrant’s Certifying Accountant Not applicable. Item 16G. Corporate Governance As a Cayman Islands company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permita foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the CaymanIslands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. Maples and Calder (Hong Kong) LLP,our Cayman Islands counsel, has provided letters to the Nasdaq Stock Market certifying that under Cayman Islands law, i) we are not required to have at leastthree members who satisfy the “independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules on the audit committee, and ii) shareholderapproval is not required for the adoption or amendment of an equity compensation plan. We follow home country practice and currently have two memberswho satisfy the “independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules on our audit committee. We also followed home countrypractice when adopting our 2018 Second Amended and Restated Share Incentive Plan in November 2018 without seeking shareholder approval. 140(1)(2)Table of Contents Other than the practices described above, there are no significant differences between our corporate governance practices and those followed by U.S.domestic companies under Nasdaq Stock Market Rules. However, if we choose to follow other home country practice in the future, our shareholders may be afforded less protection than they otherwisewould under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See “Item 3. Key Information—D. Risk Factors—RisksRelated to Our ADSs—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certainprovisions applicable to U.S. domestic public companies.” Item 16H. Mine Safety Disclosure Not applicable. 141Table of Contents PART III Item 17. Financial Statements We have elected to provide financial statements pursuant to Item 18. Item 18. Financial Statements The consolidated financial statements of Uxin Limited, its subsidiaries and its consolidated variable interest entities are included at the end of thisannual report. Item 19. Exhibits ExhibitNumber Description of Document1.1Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 of theregistration statement on Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securities and ExchangeCommission on June 1, 2018) 2.1Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 of the registration statement on Form F-1/A(file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on June 13, 2018) 2.2Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on June 13, 2018) 2.3Deposit Agreement, among the Registrant, the depositary and the holders and beneficial owners of American Depositary Shares issuedthereunder dated June 27, 2018 (incorporated by reference to Exhibit 4.3 of the registration statement on Form S-8 (file no. 333-227576),filed by the Registrant with the Securities and Exchange Commission on September 28, 2018) 2.4Shareholders Agreement, between the Registrant and other parties thereto dated as of January 2, 2018 (incorporated by reference toExhibit 4.4 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.1*2018 Second Amended and Restated Share Incentive Plan 4.2Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by reference toExhibit 10.2 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.3Form of Employment Agreement between the Registrant and its executive officers (incorporated by reference to Exhibit 10.3 of theregistration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and ExchangeCommission on May 29, 2018) 4.4English translation of the Amended and Restated Exclusive Business Cooperation Agreement between Youxinpai and Youxin Huliandated September 11, 2014 (incorporated by reference to Exhibit 10.4 of the registration statement on Form F-1 (file no. 333-225266), asamended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 142Table of Contents 4.5English translation of the Fourth Amended and Restated Equity Interest Pledge Agreement among Youxinpai, Youxin Hulian andMr. Kun Dai dated November 23, 2016 (incorporated by reference to Exhibit 10.5 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.6English translation of the Fourth Amended and Restated Power of Attorney issued by Mr. Kun Dai to Youxinpai dated November 23,2016 (incorporated by reference to Exhibit 10.6 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on May 29, 2018) 4.7English translation of the Fifth Amended and Restated Exclusive Option Agreement among Youxinpai, Youxin Hulian and Mr. Kun Daidated February 4, 2018 (incorporated by reference to Exhibit 10.7 of the registration statement on Form F-1 (file no. 333-225266), asamended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.8English translation of the Equity Interest Pledge Agreement among Youxinpai, Youxin Hulian and Beijing Min Si Lian Hua InvestmentManagement Co., Ltd. dated September 11, 2014 (incorporated by reference to Exhibit 10.8 of the registration statement on Form F-1 (fileno. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.9English translation of the Power of Attorney issued by Beijing Min Si Lian Hua Investment Management Co., Ltd. to Youxinpai datedSeptember 11, 2014 (incorporated by reference to Exhibit 10.9 of the registration statement on Form F-1 (file no. 333-225266), asamended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.10English translation of the Amended and Restated Exclusive Option Agreement among Youxinpai, Youxin Hulian and Beijing Min SiLian Hua Investment Management Co., Ltd. dated February 4, 2018 (incorporated by reference to Exhibit 10.10 of the registrationstatement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission onMay 29, 2018) 4.11English translation of the Loan Agreement between Youxinpai and Mr. Kun Dai dated November 23, 2016 (incorporated by reference toExhibit 10.11 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.12English translation of the Exclusive Business Cooperation Agreement between Yougu and Yishouche dated April 9, 2016 (incorporatedby reference to Exhibit 10.12 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with theSecurities and Exchange Commission on May 29, 2018) 4.13English translation of the Equity Interest Pledge Agreement among Yougu, Yishouche and Mr. Kun Dai dated April 9, 2016 (incorporatedby reference to Exhibit 10.13 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with theSecurities and Exchange Commission on May 29, 2018) 4.14English translation of the Power of Attorney issued by Mr. Kun Dai to Yougu dated April 9, 2016 (incorporated by reference toExhibit 10.14 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.15English translation of the Amended and Restated Exclusive Option Agreement among Yougu, Yishouche and Mr. Kun Dai datedFebruary 4, 2018 (incorporated by reference to Exhibit 10.15 of the registration statement on Form F-1 (file no. 333-225266), as amended,filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 143Table of Contents 4.16English translation of the Amended and Restated Equity Interest Pledge Agreement among Yougu, Yishouche and Beijing Min Si LianHua Investment Management Co., Ltd. dated February 4, 2018 (incorporated by reference to Exhibit 10.16 of the registration statementon Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.17English translation of the Power of Attorney issued by Beijing Min Si Lian Hua Investment Management Co., Ltd. to Yougu datedFebruary 4, 2018 (incorporated by reference to Exhibit 10.17 of the registration statement on Form F-1 (file no. 333-225266), as amended,filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.18English translation of the Amended and Restated Exclusive Option Agreement among Yougu, Yishouche and Beijing Min Si Lian HuaInvestment Management Co., Ltd. dated February 4, 2018 (incorporated by reference to Exhibit 10.18 of the registration statement onForm F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.19English translation of the Exclusive Business Cooperation Agreement between Youxin Lubao and Fengshun Lubao dated April 18, 2015(incorporated by reference to Exhibit 10.19 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on May 29, 2018) 4.20*English translation of the Power of Attorney issued by Yishouche to Youxin Lubao dated July 20, 2018 4.21*English translation of the Amended and Restated Exclusive Option Agreement among Youxin Lubao, Fengshun Lubao, and Yishouchedated July 20, 2018 4.22*English translation of the Equity Interest Pledge Agreement among Youxin Lubao and Fengshun Lubao dated July 20, 2018 4.23Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, ClearVue Uxin Holdings, Ltd. and certain other parties thereto dated June 20, 2017 (incorporated by reference toExhibit 10.37 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.24Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Ningbo Meishan Bonded Port Area Jiugen Investment Management Co., Ltd. and certain other parties thereto datedJune 20, 2017 (incorporated by reference to Exhibit 10.38 of the registration statement on Form F-1 (file no. 333-225266), as amended,filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.25Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Ningbo Meishan Bonded Port Area Jiuze Investment Management Co., Ltd. and certain other parties thereto datedJune 20, 2017 (incorporated by reference to Exhibit 10.39 of the registration statement on Form F-1 (file no. 333-225266), as amended,filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 4.26Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Pine Castle Holdings Limited and certain other parties thereto dated June 30, 2017 (incorporated by reference toExhibit 10.40 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 144Table of Contents 4.27Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Kingkey New Era Auto Industry Limited and certain other parties thereto dated August 31, 2017 (incorporated byreference to Exhibit 10.41 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with theSecurities and Exchange Commission on May 29, 2018) 4.28Series G Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, BOCOM International Supreme Investment Limited dated and certain other parties thereto November 23, 2017(incorporated by reference to Exhibit 10.42 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on May 29, 2018) 4.29Series G+ Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Kingkey New Era Auto Industry Global Limited and certain other parties thereto dated November 23, 2017(incorporated by reference to Exhibit 10.43 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on May 29, 2018) 4.30Series G+ Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Apex Ease Limited and certain other parties thereto dated November 23, 2017 (incorporated by reference toExhibit 10.44 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities andExchange Commission on May 29, 2018) 4.31Series G+ Share Subscription Agreement among Mr. Kun Dai, the Registrant, the Registrant’s subsidiaries, the Registrant’s consolidatedaffiliated entities, Huangpu Investment Holding Limited and certain other parties thereto dated December 6, 2017 (incorporated byreference to Exhibit 10.45 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with theSecurities and Exchange Commission on May 29, 2018) 4.32Fairlubo Auction Company Limited Third Amended And Restated Shareholders’ Agreement dated May 27, 2017 (incorporated byreference to Exhibit 10.46 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with theSecurities and Exchange Commission on May 29, 2018) 4.33English translation of Vehicle Financing Business Cooperation Agreement by and among Kaifeng and Zhejiang Chouzhou CommercialBank Co., Ltd. dated November 9, 2016 and Supplemental Agreements dated June 29, 2017, August 17, 2017, and November 28, 2017(incorporated by reference to Exhibit 10.47 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on June 22, 2018) 4.34English translation of Vehicle Financing Business Cooperation Agreement by and among Kaifeng and Sichuan XW Bank Co., Ltd. datedJune 8, 2017 and Supplemental Agreement dated June 30, 2017 (incorporated by reference to Exhibit 10.48 of the registration statementon Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on June 22,2018) 4.35English translation of the Auto Financing Business Cooperation Agreement by and among Kaifeng and a third-party financing partnerdated June 28, 2018 and Supplemental Agreements dated October 19, 2018 and December 7, 2018, respectively 4.36Amended and Restated Share Conversion Agreement by and among Fengshion Capital Investment Fund, LP, LC Fund V, L.P., LCParallel Fund V, L.P., Fairlubo Auction Company Limited, and the Registrant dated June 8, 2018 (incorporated by reference toExhibit 10.50 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securitiesand Exchange Commission on June 13, 2018) 145*†Table of Contents 4.37Share Surrender and Loan Settlement Agreement between Mr. Kun Dai, Xin Gao Group Limited and the Registrant dated May 28, 2018(incorporated by reference to Exhibit 10.51 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on May 29, 2018) 4.38Convertible Note Purchase Agreement by and among the Registrant, CNCB (Hong Kong) Investment Limited and CNCB (Hong Kong)Capital Limited dated June 9, 2018 (incorporated by reference to Exhibit 10.52 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on June 13, 2018) 4.39Convertible Note Purchase Agreement by and between the Registrant and Golden Fortune Company Limited dated June 12, 2018(incorporated by reference to Exhibit 10.53 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by theRegistrant with the Securities and Exchange Commission on June 13, 2018) 4.40Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 of the registration statement on Form F-1/A (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on June 13, 2018) 8.1*List of Principal Subsidiaries and Consolidated Affiliated Entities of the Registrant 11.1Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of the registration statement on Form F-1 (file no. 333-225266), as amended, filed by the Registrant with the Securities and Exchange Commission on May 29, 2018) 12.1*Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 12.2*Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 13.1**Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 13.2**Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1*Consent of PricewaterhouseCoopers Zhong Tian LLP 15.2* Consent of JunHe LLP 101.INS*XBRL Instance Document 101.SCH*XBRL Taxonomy Extension Schema Document 101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF*XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*XBRL Taxonomy Extension Label Linkbase Document 101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith ** Furnished herewith 146Table of Contents † Certain information has been excluded from this exhibit pursuant to Rule 406 under the Securities Act. 147Table of Contents SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused andauthorized the undersigned to sign this annual report on its behalf. Uxin Limited By:/s/ Kun DaiName:Kun DaiTitle:Chairman and Chief Executive Officer Date: April 29, 2019 148Table of Contents UXIN LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting FirmF-2Consolidated Balance Sheets as of December 31, 2017 and 2018F-3-F-6Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2017 and 2018F-7-F-8Consolidated Statements of Changes in Shareholders’ (Deficit)/Equity for the years ended December 31, 2016, 2017 and 2018F-9-F-10Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and 2018F-11-F-13Notes to the Consolidated Financial StatementsF-14-F-77 F-1Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Uxin Limited Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Uxin Limited and its subsidiaries (the “Company”) as of December 31, 2018 and 2017,and the related consolidated statements of comprehensive loss, changes in shareholders’ (deficit)/equity and cash flows for each of the three years in theperiod ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, theconsolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and theresults of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principlesgenerally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error orfraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers Zhong Tian LLP Shanghai, the People’s Republic of ChinaApril 29, 2019 We have served as the Company’s auditor since 2017. F-2Table of Contents UXIN LIMITED CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2018(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes As ofDecember 31,2017 As of December 31,2018 RMB RMB US$ ASSETSCurrent assets:Cash and cash equivalents2.6291,973800,997116,709Restricted cash2.71,617,2302,013,030293,308Short-term investments2.71,000596,07886,851Accounts receivable2.940,15551,6107,520Amounts due from related parties22608,291——Advance to consumers on behalf of financing partners5827,417521,90876,044Loan recognized as a result of payment under the guarantee,net6252,555553,68880,675Advance to sellers7246,287692,714100,932Other receivables, net8251,649707,404103,072Inventory2.877,94119,3802,823Prepaid expenses and other current assets9249,769417,31460,805Financial lease receivables, net10438,693294,51142,912 Total current assets4,902,9606,668,634971,651 Non-current assets:Property, equipment and software, net11156,625199,27129,035Intangible assets, net129,94921,1793,086Goodwill2.1575,849110,42416,089Long-term investments1340,628349,88250,979Other non-current assets14112,902—— Total non-current assets395,953680,75699,189 Total assets5,298,9137,349,3901,070,840 F-3Table of Contents UXIN LIMITED CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes As ofDecember 31,2017 As of December 31,2018 RMB RMB US$ LIABILITIES AND EQUITY Current liabilities (including amounts of the consolidated VIEsand VIEs’ subsidiaries without recourse to the primarybeneficiary of RMB407,809 and RMB261,226 as ofDecember 31, 2017 and 2018, respectively)Short-term borrowings15426,783624,58891,005Accounts payable65,694156,32022,777Guarantee liabilities16173,907321,25546,808Deposit of interests from consumers and payable to financingpartners – current17732,273482,82770,350Advance from buyers collected on behalf of sellers18226,891375,80354,756Other payables and accruals19927,3891,197,300174,452Deferred revenue2.1827,598115,16016,779Other current liabilities20163,355——Derivative liabilities4, 251,596,424——Convertible notes21—1,188,192173,125 Total current liabilities4,340,3144,461,445650,052 Non-current liabilitiesLong-term borrowings15374,104481,80170,201Deposit of interests from consumers and payable to financingpartners – non-current17343,82329,7424,334Deferred tax liabilities231,6534,759693 Total non-current liabilities719,580516,30275,228 Total liabilities5,059,8944,977,747725,280 F-4Table of Contents UXIN LIMITED CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes As ofDecember 31,2017 As of December 31,2018 RMB RMB US$ Commitments and contingencies31 Mezzanine equity25 Series A convertible redeemable preferred shares (US$0.0001par value, 50,000,000 shares authorized, issued andoutstanding as of December 31, 2017)94,411——Series A-1 convertible redeemable preferred shares(US$0.0001 par value, 4,910,890 shares authorized, issuedand outstanding as of December 31, 2017)69,193——Series B convertible redeemable preferred shares (US$0.0001par value, 70,602,630 shares authorized, issued andoutstanding as of December 31, 2017)180,294——Series C convertible redeemable preferred shares (US$0.0001par value, 97,267,680 shares authorized, issued andoutstanding as of December 31, 2017)408,559——Series D convertible redeemable preferred shares (US$0.0001par value, 159,355,150 shares authorized, issued andoutstanding as of December 31, 2017)1,703,667——Series E convertible redeemable preferred shares (US$0.0001par value, 89,477,490 shares authorized, issued andoutstanding as of December 31, 2017)1,146,351——Series F convertible redeemable preferred shares (US$0.0001par value, 85,162,200 shares authorized, issued andoutstanding as of December 31, 2017)1,563,657——Series G convertible redeemable preferred shares (US$0.0001par value, 130,384,730 shares authorized, issued andoutstanding as of December 31 2017)3,214,932——Redeemable non-controlling interests439,580—— Total Mezzanine equity8,420,644—— F-5Table of Contents UXIN LIMITED CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes As ofDecember 31,2017 As of December 31,2018 RMB RMB US$ Shareholders’ (deficit)/equityOrdinary shares (US$0.0001 par value, 1,312,839,230 sharesand 10,000,000,000 shares authorized as of December 31,2017 and 2018, respectively; 49,318,860 shares issued andoutstanding as of December 31, 2017; 839,850,038 Class Aordinary shares and 40,809,861 Class B ordinary sharesissued and outstanding as of December 31, 2018)243057584Additional paid-in capital—12,967,9861,889,496Accumulated other comprehensive income76,60786,06112,539Accumulated deficit(8,207,801)(10,680,489)(1,556,197) Total UXIN LIMITED shareholders’ (deficit)/equity(8,131,164)2,374,133345,922Non-controlling interests(50,461)(2,490)(362)Total shareholders’ (deficit)/equity(8,181,625)2,371,643345,560 Total liabilities, mezzanine equity and shareholders’ equity5,298,9137,349,3901,070,840 The accompanying notes are an integral part of these consolidated financial statements F-6Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSFOR THE YEAR ENDED DECEMBER 31, 2016, 2017 AND 2018(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes Year endedDecember 31,2016 Year endedDecember 31,2017 Year ended December 31,2018 RMB RMB RMB US$Revenues:To consumers (“2C”) – intra-regional- Transaction facilitation revenue2.1981,807230,250481,05570,092- Loan facilitation revenue2.19314,172944,4061,564,620227,972To consumers (“2C”) – cross-regional - Transaction facilitation revenue2.19——164,28023,936- Loan facilitation revenue2.19——209,44530,517To businesses (“2B”) - Transaction facilitation revenue2.19293,224519,276606,59988,384Others2.19135,298257,440289,45042,174Total Revenues 824,5011,951,3723,315,449483,075 Cost of revenues2.21(533,371)(747,788)(1,138,995)(165,957)Gross profit 291,1301,203,5842,176,454317,118 Operating expenses: Sales and marketing2.22(793,521)(2,203,139)(2,686,956)(391,502)Research and development2.23(167,791)(226,010)(329,430)(47,999)General and administrative2.24(583,697)(599,905)(1,724,060)(251,204)Gains/(losses) from guarantee liability161,9832,284(1,931)(281)Total operating expenses (1,543,026)(3,026,770)(4,742,377)(690,986) Loss from operations (1,251,896)(1,823,186)(2,565,923)(373,868) Interest (income)/expense, net 677(30,183)(120,453)(17,550)Other expenses, net (16,127)(12,112)(16,813)(2,450)Foreign exchange gains/(losses) 1,918477(8,232)(1,199)Fair value change of derivative liabilities4, 25(116,056)(885,821)1,185,090172,673Loss before income tax expense (1,381,484)(2,750,825)(1,526,331)(222,394)Income tax expense23(1,805)(570)(14,585)(2,125)Equity in (loss)/income of affiliates (9,637)3,5972,631383Net loss (1,392,926)(2,747,798)(1,538,285)(224,136) Less: net loss attributable to non-controlling interestsshareholders (35,181)(25,202)(15,771)(2,298)Net loss attributable to UXIN LIMITED (1,357,745)(2,722,596)(1,522,514)(221,838) F-7Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSFOR THE YEAR ENDED DECEMBER 31, 2016, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes Year endedDecember 31,2016 Year endedDecember 31,2017 Year endedDecember 31, 2018 RMB RMB RMB US$ Accretion on redeemable preferred shares (421,346)(555,824)(318,951)(46,473)Deemed contribution from preferred shareholders 3,428———Deemed dividend to preferred shareholders25—(587,564)(544,773)(79,376)Deemed dividend from preferred shareholders25—92,779—— Net loss attributable to ordinary shareholders (1,775,663)(3,773,205)(2,386,238)(347,687) Net loss (1,392,926)(2,747,798)(1,538,285)(224,136)Foreign currency translation (3,252)43,4064,818702 Total comprehensive loss (1,396,178)(2,704,392)(1,533,467)(223,434)Less: total comprehensive loss attributable to non-controlling interests shareholders (31,438)(27,861)(22,359)(3,258)Total comprehensive loss attributable to UXINLIMITED (1,364,740)(2,676,531)(1,511,108)(220,176) Net loss attributable to ordinary shareholders (1,775,663)(3,773,205)(2,386,238)(347,687)Weighted average number of ordinary shares used incomputing net loss per share, basic and diluted2949,174,85049,318,860477,848,763477,848,763 Net loss per share attributable to ordinaryshareholders Basic29(36.11)(76.51)(4.99)(0.73)Diluted29(36.11)(76.51)(4.99)(0.73) The accompanying notes are an integral part of these consolidated financial statements. F-8Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITYFOR THE YAER ENDED DECEMBER 31, 2016, 2017 AND 2018(All amounts in thousands, except for share and per share data, unless otherwise noted) Ordinary share Total UXIN (US $0.0001 par value) Accumulated other LIMITED Non- Total Number of Additional paid-in comprehensive Accumulated shareholders’ controlling shareholders’shares Amount capital income deficit deficit interest deficit RMB RMB RMB RMB RMB RMB RMB Balance as of December 31,201557,411,63035—37,537(2,613,833)(2,576,261)19,347(2,556,914)Foreign currencytranslation adjustments———(6,995)—(6,995)3,743(3,252)Net loss————(1,357,745)(1,357,745)(35,181)(1,392,926)Repurchase of ordinaryshares(28,078,290)(18)——(299,266)(299,284)—(299,284)Share-basedcompensation19,985,52013226,429——226,442—226,442Deemed contributionfrom preferredshareholders——3,428——3,428—3,428Accretion on preferredshares to redemptionvalue (Note 25)——(229,857)—(191,489)(421,346)—(421,346)Balance as of December 31,201649,318,86030—30,542(4,462,333)(4,431,761)(12,091)(4,443,852) Balance as of December 31,201649,318,86030—30,542(4,462,333)(4,431,761)(12,091)(4,443,852)Foreign currencytranslation adjustments———46,065—46,065(2,659)43,406Net loss————(2,722,596)(2,722,596)(25,202)(2,747,798)Share-basedcompensation (Note26)——165,873——165,873—165,873Transaction with non-controlling interests————(45,357)(45,357)(18,851)(64,208)Accretion on preferredshares to redemptionvalue (Note 25)——(73,094)—(482,730)(555,824)—(555,824)Non-controlling interestsarising from businesscombination (Note 3)——————8,3428,342Deemed dividend topreferred shareholders(Note 25)————(587,564)(587,564)—(587,564)Deemed dividend frompreferred shareholders(Note 25)——(92,779)—92,779———Balance as of December 31,201749,318,86030—76,607(8,207,801)(8,131,164)(50,461)(8,181,625) F-9Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT)/EQUITYFOR THE YAER ENDED DECEMBER 31, 2016, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Ordinary share Total UXIN (US $0.0001 par value) Accumulated other LIMITED Non- TotalNumber of Additional paid-incomprehensive Accumulated shareholders’ controlling shareholders’sharesAmountcapitalincome deficit (deficit)/equity interest (deficit)/equityRMBRMBRMB RMB RMB RMB RMB Balance as ofDecember 31, 201749,318,86030—76,607(8,207,801)(8,131,164)(50,461)(8,181,625)Foreign currencytranslation adjustments———11,407—11,407(6,589)4,818Net loss————(1,522,514)(1,522,514)(15,771)(1,538,285)Share-based compensation(Note 26)——151,274——151,274—151,274Issuance of restricted sharesto Mr. Kun Dai17,742,89011620,435——620,446—620,446Issuance of ordinary sharesdue to exercise of theshare option8,479,5055286,676——286,681—286,681Conversion of redeemablepreferred shares (Note25)743,343,82048611,012,694——11,013,180—11,013,180Deemed dividend topreferred shareholders(Note 25)————(544,773)(544,773)—(544,773)Accretion on preferredshares to redemptionvalue (Note 25)——(38,582)—(280,369)(318,951)—(318,951)Issuance of ordinary sharesupon Initial PublicOffering75,000,000501,342,831——1,342,881—1,342,881Repurchase of the surrendershares (Note 24)(26,251,889)(16)(573,600)—(125,064)(698,680)—(698,680)Fairlubo Auction CompanyLimited share swap (Note4)13,026,7139161,294(1,953)—159,35074,561233,911Transaction with non-controlling interests——(182)——(182)(4,819)(5,001)40,809,861 ordinary shareswere redesignated toClass B ordinary shareswith super voting powergranted to Mr. Kun Dai(Note 26)——5,146—325,1785895,767Balance as ofDecember 31, 2018880,659,89957512,967,98686,061(10,680,489)2,374,133(2,490)2,371,643 The accompanying notes are an integral part of these consolidated financial statements. F-10Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2016, 2017 AND 2018(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes Year EndedDecember 31,2016 Year EndedDecember 31,2017 Year EndedDecember 31, 2018 RMB RMB RMB US$ Cash flows from operating activities:Net loss(1,392,926)(2,747,798)(1,538,285)(224,136)Adjustments to reconcile net loss to net cash generatedfrom operating activities:Shared-based compensation26226,429165,8731,052,032153,286Compensation expense to previous shareholders 41,129———Depreciation of property, equipment and software1149,31668,18588,80312,939Amortization of intangible assets123,1873,6785,619819Loss from disposal of property, equipment andsoftware 5,5171,54229042Equity in loss/(income) of affiliates 9,637(3,597)(2,631)(383)(Gains)/losses from guarantee liability16(1,983)(2,284)1,931281Accrual of allowance for doubtful accounts82691,60419,7032,871Deferred income tax liabilities (620)(620)(1,107)(161)Fair value change of derivative liabilities4, 25116,056885,821(1,185,090)(172,673)Goodwill impairment2.15——3,670535 F-11Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2016, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes Year EndedDecember 31,2016 Year EndedDecember 31,2017 Year EndedDecember 31, 2018 RMB RMB RMB US$ Cash flows from operating activities:Changes in operating assets and liabilities:Receivables, prepaid expenses and othercurrent assets(58,987)(222,391)(595,277)(86,736)Advance to consumers on behalf of financingpartners70,993(796,278)305,50944,514Loan recognized as a result of payment underthe guarantee(14,443)(440,417)(368,467)(53,687)Advance to sellers55,280(200,513)(446,427)(65,046)Financial lease receivables(347,326)(26,832)141,51720,620Inventory(4,345)(67,252)58,5618,533Payables, accruals and other current liabilities170,203911,639654,28195,332Deposit of interests from consumers andpayable to financing partners400,642628,889(563,527)(82,108)Deferred revenue10,7626,50887,56212,758 Net cash used in operating activities(661,210)(1,834,243)(2,281,333)(332,400) Cash flows from investing activities:Proceeds from disposal of property, equipmentand software11,4818857,7351,127Purchase of property, equipment and software(94,923)(81,211)(133,907)(19,511)Cash paid for long-term investments(11,423)(152,723)(189,450)(27,604)Cash paid for acquisition, net of cash acquired—(3,575)(66,339)(9,665)Proceeds from disposal of long-terminvestments1505,048——Increase in restricted cash(566,742)(911,376)(395,800)(57,670)Decrease/(increase) in short-term investments670,79896,118(595,078)(86,706)Loan extended to a related party—(451,385)(101,578)(14,800) Net cash generated from/(used in) investingactivities9,341(1,498,219)(1,474,417)(214,829) F-12Table of Contents UXIN LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2016, 2017 AND 2018 (CONTINUED)(All amounts in thousands, except for share and per share data, unless otherwise noted) Notes Year EndedDecember 31,2016 Year EndedDecember 31,2017 Year EndedDecember 31, 2018 RMB RMB RMB US$ Cash flows from financing activities: Proceeds from borrowings 193,828800,8871,209,431176,219Net proceeds from issuance of convertibleredeemable preferred shares 162,2092,721,0651,674,408243,969Repayment of borrowings (182,994)(204,068)(1,183,797)(172,485)Repurchase of ordinary shares (306,044)———Acquisition of non-controlling interest in asubsidiary —(29,042)——Net proceeds from initial public offering andissuance of convertible note ——2,574,010375,045 Net cash (used in)/generated from financingactivities (133,001)3,288,8424,274,052622,748 Effect of exchange rate changes on cash andcash equivalents 6,4643,334(9,278)(1,352) Net (decrease)/increase in cash and cashequivalents (778,406)(40,286)509,02474,167 Cash and cash equivalents at beginning of theyear 1,110,665332,259291,97342,542 Cash and cash equivalents at end of the year 332,259291,973800,997116,709 Supplemental disclosure of cash flowinformation - Cash paid for income tax 2616,4294,575667- Cash paid for interest 3,5086,38632,1134,679 Supplemental schedule of non-cash investingand financing activities - Accretion on redeemable preferred shares25421,346555,824318,95146,473- Deemed contribution from preferredshareholders 3,428———- Deemed dividend to preferred shareholders —587,564544,77379,376- Deemed dividend from preferred shareholders —92,779——- Repurchase of the surrender shares24——746,253108,733 The accompanying notes are an integral part of these consolidated financial statements. F-13Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 1. PRINCIPAL ACTIVITIES AND ORGANIZATION The accompanying consolidated financial statements include the financial statements of Uxin Limited (the “Company” or “Uxin”), its subsidiaries andvariable interest entities (“VIEs”). The Company, its subsidiaries and the consolidated VIEs are collectively referred to as the “Group”. The Company was incorporated under the law of the Cayman Islands as the exempted limited liability company on December 8, 2011. The Company servesas an investment holding company and currently has no operations of its own. The Group primarily engages in operating used car e-commerce platforms through its mobile applications (Uxin Used Car / Uxin Auction) and websites(www.xin.com / www.youxinpai.com), facilitating used car transaction services (2B / 2C) and facilitating financing solutions offered by third-party financingpartners to buyers for their used car purchases (2C). The Group’s principal operation and geographic market is in the People’s Republic of China (“PRC”). In 2016, the Group spun off its 2B business through a transfer of the equity interest of Youxinpai (Beijing) Information Technology Co., Ltd.(“Youxinpai”), asubsidiary of the Company, to a series of shareholders, which represented the same offshore shareholders of the Company, i.e. same shareholders with theirrespective onshore and offshore entities. In 2017, the Company made its strategic decision for the existing shareholders of Youxinpai to transfer 100% equityinterest in Youxinpai to the Company (referred to as “the Reorganization”). On June 27, 2018, the Company completed its IPO on NASDAQ Global Select Market under the symbol “UXIN”. The Company offered 25,000,000 AmericanDepositary Shares (“ADS”). Each ADS represents three ordinary share and was sold to the public at US$9.00 per ADS. Also, the Company entered intoConvertible Note Purchase Agreements with CNCB (Hong Kong) Investment Limited (the “CNCB (Hong Kong)”) and Golden Fortune Company Limited(the “Golden Fortune”) concurrently with the closing of IPO. Net proceeds raised by the Company from the IPO and private placement in total amounted toapproximately US$382.1 million (equivalent to RMB 2.6 billion) after deducting underwriting discounts commissions and other offering expenses. As of December 31, 2018, the Company’s principal subsidiaries and consolidated VIEs are as follows: Subsidiaries Place ofincorporation Date ofincorporation oracquisition Percentageof director indirect Principal activities Youxinpai (Beijing) Information Technology Co., Ltd.BeijingJune 15, 2012100%Used car auctionYouhan (Shanghai) Information Technology Co., Ltd.ShanghaiDecember 25, 2015100%Used car auctionKai Feng Finance Lease (Hangzhou) Co., Ltd.HangzhouMarch 25, 2013100%Loan facilitationBo Yu Finance Lease (Tianjin) Co., Ltd.TianjinMarch 6, 2015100%Loan facilitationYougu (Shanghai) Information Technology Co., Ltd.ShanghaiMarch 13, 2015100%Transaction serviceYouzhen (Beijing) Business Consulting Co., Ltd.BeijingMarch 28, 2016100%Transaction serviceYouxin (Shanghai) Second Hand Car Business Co., Ltd.ShanghaiJanuary 26, 2016100%Transaction serviceBeijing Youxin Fengshun Lubao Vehicle* AuctionCo., Ltd.BeijingMarch 13, 201594.94%Salvage car auctionYouxin (Shanxi) Technology Information Co., Ltd.Xi’anApril 27, 2018100%Transaction service F-14Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 1. PRINCIPAL ACTIVITIES AND ORGANIZATION (CONTINUED) As of December 31, 2018, the Company’s principal subsidiaries and consolidated VIEs are as follows: VIEs SubsidiariesPlace ofincorporation Date ofincorporation oracquisition Percentageof director indirect Principal activities Youxin Internet (Beijing) Information TechnologyCo., Ltd.BeijingAugust 11, 201199.99%Auction platformBeijing Fengshun Lubao* Automotive AuctionCo., Ltd.BeijingJune 10, 201194.94%Salvage car auctionYouxin Yishouche (Beijing) InformationTechnology Co., Ltd.BeijingMarch 12, 201599.99%Transaction service * Both are subsidiaries of Fairlubo Auction Company Limited (“Fairlubo”) 2. PRINCIPAL ACCOUNTING POLICIES 2.1 Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ofAmerica (“US GAAP”). Significant accounting policies followed by the Group in the preparation of its accompanying consolidated financial statements are summarized below. 2.2 Basis of consolidation The consolidated financial statements include the financial statements of the Company, its subsidiaries, VIEs and VIEs’ subsidiaries. A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or removethe majority of the members of the board of directors; to cast a majority of votes at the meeting of the board of directors or to govern the financial andoperating policies of the investee under a statute or agreement among the shareholders or equity holders. The Company applies the guidance codified in Accounting Standard Codification 810, Consolidations (“ASC 810”) on accounting for VIEs and theirrespective subsidiaries, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entity in which it has acontrolling financial interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient topermit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability tomake certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns, or (c) an equity investor has voting rightsthat are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor. All transactions and balances between the Company, its subsidiaries, VIEs and VIEs’ subsidiaries have been eliminated upon consolidation. F-15Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation(continued) Variable interest entities In order to comply with PRC regulatory requirements restricting foreign ownership of internet information services under value-added telecommunicationsservices and certain other businesses in China, the Company operates online platforms that provide internet information services and engages in otherforeign-ownership-restricted businesses through certain PRC domestic companies, whose equity interests are held by certain management members of theCompany (“Nominee Shareholders”). The Company obtained control over these PRC domestic companies by entering into a series of ContractualArrangements with these PRC domestic companies and their respective Nominee Shareholders. These contractual agreements cannot be terminated by theNominee Shareholders or the PRC domestic companies. As a result, the Company which maintains the ability to control these PRC domestic companies isentitled to substantially all of the economic benefits from these PRC domestic companies and is obligated to absorb expected losses of these PRC domesticcompanies. Management concluded that these PRC domestic companies are VIEs of the Company, of which the Company is the ultimate primary beneficiary.As such, the Group consolidated financial results of these PRC domestic companies and their subsidiaries. The principal terms of the agreements entered intoamongst the VIEs, their respective shareholders and the Group’s subsidiaries (“Primary Beneficiaries”) are further described below. The Company primarily operated 2B and 2C online platforms through one of the VIEs, Youxin Hulian via the contractual agreements. In January 2015, theMIIT eliminates the restrictions on foreign ownership in the SHFTZ Notice for enterprises in Shanghai Pilot Free Trade Zone that provide online dataprocessing and transaction processing services (operating E-commerce) under value-added telecommunications services. Certain of our eligible WFOE andsubsidiary of WFOE, Yougu and Youhan, have applied for and obtained the VATS Licenses to conduct E-commerce in 2015 and 2016, and they have beenoperating our 2B and 2C online platforms since then. Currently, Youxin Hulian, Yishouche and Fengshun Lubao hold the VATS Licenses for internet information services to operate other online platforms of theCompany and they may hold equity interests of subsidiaries conducting business that are restricted with foreign ownership. Loan Agreements Pursuant to the relevant loan agreements, the Group’s relevant PRC subsidiary has granted interest-free loans to the relevant Nominee Shareholders of therelevant VIE with the sole purpose of providing funds necessary for the capital injection to the relevant VIEs. Only the Group’s relevant PRC subsidiary canrequire the Nominee Shareholder to settle the loan amount with the equity interests of relevant VIEs, subject to any applicable PRC laws, rules andregulations. And both parties have agreed that any proceeds from sale of the Nominee Shareholder’s equity interest in relevant VIE should be repaid to theGroup’s relevant PRC subsidiary. The terms of the loan agreements are ten years and can be extended with the written consent of both parties before itsexpiration. Exclusive option agreements The Nominee Shareholders of the VIEs have granted the Group’s relevant PRC subsidiaries the exclusive and irrevocable right to purchase or to designateone or more person(s) at their discretion to purchase part or all of the equity interests in the VIEs from the Nominee Shareholders for a purchase price at anytime, subject to the lowest price permitted by PRC laws and regulations. The VIEs and their Nominee Shareholders have agreed that without prior writtenconsent of the Group’s relevant PRC subsidiaries, their respective Nominee Shareholders cannot sell, transfer, pledge or dispose their equity interests, and theVIEs cannot sell, transfer, pledge or dispose, but not limit to the equity interest, significant assets, significant revenue and significant business. Also asagreed, the VIEs cannot declare any dividend or change capitalization structure of the VIEs and cannot enter into any loan or investment agreements.Furthermore, the Nominee Shareholders have agreed that any proceeds but not limited to the sales of the Nominee Shareholders’ equity interest in relevantVIEs should be gratuitously paid to the Group’s relevant PRC subsidiaries or one or more person(s) at their discretion. F-16Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation(continued) Power of attorney Pursuant to the irrevocable power of attorney, each of the Nominee Shareholders appointed the Group’s relevant PRC subsidiaries as their attorney-in-fact toexercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, attending shareholders meetings, votingon their behalf on all matters requiring shareholder approval, including but not limited to sale, transfer, pledge, or disposition of all or part of the NomineeShareholders’ equity interests, and designation and appointing the legal representative, directors, supervisors, chief executive officer and other seniormanagement members of the VIEs. Each power of attorney will remain in force during the period when the Nominee Shareholders continue to be shareholdersof the VIEs. Each Nominee Shareholder has waived all the rights which have been authorized to the person designated by the Group’s relevant PRCsubsidiaries under each power of attorney. Exclusive business cooperation agreement Pursuant to the exclusive business cooperation agreement, the Group’s relevant PRC subsidiaries have agreed to provide to the VIEs services, including, butnot limited to, development, maintenance and update software, design, installation, daily management, maintenance and updating of the network system,hardware and database design, marketing. The VIEs shall pay to the Group’s relevant PRC subsidiaries service fees determined based on the complexity anddifficulty of the services, title of and time consumed by employees, contents and value of the services, operation conditions and market price of the serviceprovided. The agreement shall remain in full force and effect unless terminated in accordance with the provisions of this Agreement or terminated in writingby the Group’s relevant PRC subsidiaries. Equity pledge agreements Pursuant to the relevant equity pledge agreements, the Nominee Shareholders of the VIEs have pledged all of their equity interests in relevant VIEs to theGroup’s relevant PRC subsidiaries as collateral for all of their to direct, indirect and derivate losses and anticipated profits of the PRC subsidiaries incurred inthe event of default and to secure their obligations under the above agreements. The relevant PRC subsidiaries are entitled to have any dividends based onthe pledged equity interest in relevant VIEs. The Nominee Shareholders may not transfer or assign the equity interests, the rights and obligations in theequity pledge agreements and may not create or permit to create any pledges which may have an adverse effect on the rights or benefits of the Group’srelevant PRC subsidiaries without the Group’s relevant PRC subsidiaries’ pre-approval. In addition, the Group’s relevant PRC subsidiaries are entitled topurchase at a discount, auction or sell the equity interests pledged and have priority to obtain the proceeds from above auctions or sales, if an event of defaulthappens. The equity pledge agreements will expire only when the Nominee Shareholders have completed all their obligations under the above agreements. Risks in relation to the VIE structure In the opinion of the Company’s legal counsel, (i) the ownership structure relating to the VIEs of the Company is in compliance with existing PRC laws andregulations; and (ii) the contractual arrangements with the VIEs and their Nominee Shareholders are valid, binding and enforceable, and will not result in anyviolation of PRC laws or regulations currently in effect. However, uncertainties in the interpretation and application of current and future PRC laws, regulations and rules could cause the Company’s currentownership structure to be found in violation of any existing or future PRC laws or regulations and could limit the Company’s ability, through the PrimaryBeneficiaries, to enforce its rights under these contractual arrangements. Furthermore, Nominee Shareholders of the VIEs may have interests that are differentwith those of the Company, which could potentially increase the risk that they would seek to act in contrary to the terms of the aforementioned agreements. F-17Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) In addition, if the current structure or any of the contractual arrangements were found to be in violation of any existing or future PRC law, the Company maybe subject to penalties, which may include but not be limited to, the cancellation or revocation of the Company’s business and operating licenses, beingrequired to restructure the Company’s operations or discontinue the Company’s operating activities. The imposition of any of these or other penalties mayresult in a material and adverse effect on the Company’s ability to conduct its operations. In such case, the Company may not be able to operate or control theVIEs, which may result in deconsolidation of the VIEs. In January 2015, the Ministry of Commerce (“MOFCOM”), released for public comment a proposed PRC law, the Draft Foreign Investment Enterprises(“FIE”) Law, that appears to include VIEs within the scope of entities that could be considered to be FIEs, that would be subject to restrictions under existingPRC law on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the concept of “actual control” for determiningwhether an entity is considered to be an FIE. In addition to control through direct or indirect ownership or equity, the Draft FIE Law includes control throughcontractual arrangements within the definition of “actual control”. If the Draft FIE Law is passed by the People’s Congress of the PRC and goes into effect inits current form, these provisions regarding control through contractual arrangements could be construed to include the Group’s contractual arrangementswith its VIEs, and as a result, the Group’s VIEs could become explicitly subject to the current restrictions on foreign investment in certain categories ofindustry. The Draft FIE Law includes provisions that would exempt from the definition of FIEs where the ultimate controlling shareholders are either entitiesorganized under PRC law or individuals who are PRC citizens. The Draft FIE Law is silent as to what type of enforcement action might be taken againstexisting VIE, that operates in restricted or prohibited industries and is not controlled by entities organized under PRC law or individuals who are PRCcitizens. If the restrictions and prohibitions on FIEs included in the Draft FIE Law are enacted and enforced in their current form, the Group’s ability to use thecontractual arrangements with its VIEs and the Group’s ability to conduct business through the VIEs could be severely limited. There are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, theCompany cannot be assured that the PRC government authorities will not ultimately take a view that is contrary to the Company’s belief and the opinion ofits PRC legal counsel. In March 2019, the draft Foreign Investment Law was submitted to the National People’s Congress for review and was approved onMarch 15, 2019, which will come into effect from January 1, 2020. The approved Foreign Investment Law does not touch upon the relevant concepts andregulatory regimes that were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the ForeignInvestment Law. Since the Foreign Investment Law is new, there are substantial uncertainties exist with respect to its implementation and interpretation andthe possibility that such entities will be deemed as foreign-invested enterprise and subject to relevant restrictions in the future shall not be excluded. If thecontractual arrangements establishing the Company’s VIE structure are found to be in violation of any existing law and regulations or future PRC laws andregulations, the relevant PRC government authorities will have broad discretion in dealing with such violation, including, without limitation, levying fines,confiscating income or the income of affiliated Chinese entities, revoking business licenses or the business licenses of affiliated Chinese entities, requiringaffiliated Chinese entities to restructure ownership structure or operations and requiring affiliated Chinese entities to discontinue any portion or all of value-added telecommunications, E-commerce and internet information services. Any of these actions could cause significant disruption to the Company’sbusiness operations, and have a severe adverse impact on the Company’s cash flows, financial position and operating performance. If the imposing of thesepenalties cause the Company to lose its rights to direct the activities of and receive economic benefits from its VIEs, which in turn may restrict theCompany’s ability to consolidate and reflect in its financial statements the financial position and results of operations of its VIEs. Pursuant to the contractual arrangements with the VIEs, the Company has the power to direct activities of the VIEs, and can have assets transferred freely outof the VIEs without any restrictions. Therefore, the Company considers there to be no assets of a consolidated VIE that can be used only to settle obligationsof the VIE, except for registered capital of the VIEs amounting to a total of RMB134.4 million as of December 31, 2017 and RMB144.2 million as ofDecember 31, 2018. As all the consolidated VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do nothave recourse to the general credit of the Company for any of the liabilities of the consolidated VIEs. F-18Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.2 Basis of consolidation (continued) The following table sets forth the assets, liabilities and results of operations and cash flows of the VIEs and their subsidiaries taken as a whole, which areincluded in the Group’s consolidated financial statements. Transactions between the VIEs and their subsidiaries are eliminated in the balances presentedbelow: December 31, 2017 December 31, 2018 RMB RMB Cash and cash equivalents105,68067,940Amounts due from related parties148,714165,940Accounts receivable6,8846,957Other receivables, net63,83295,297Inventory71,2482,120Prepaid expense and other current assets64,97822,364Long-term investments25,42127,427Property, equipment and software, net12,83512,436Intangible assets, net2,70317,295Goodwill—38,246Total assets502,295456,022 Accounts payable4,8647,379Amounts due to related parties727,917914,109Current portion of long-term borrowings—281Deferred tax liability—3,725Other payables and accruals402,945249,841Total liabilities1,135,7261,175,335 Year EndedDecember 31, 2016 Year EndedDecember 31, 2017 Year EndedDecember 31, 2018 RMB RMB RMB Total revenues103,830244,830416,578Cost of revenues(36,788)(130,099)(156,093)Net loss(9,253)(603,030)(85,882) Net cash generated from/(used in) operating activities155,589(584,072)(51,713)Net cash used in investing activities(17,037)(5,529)(67,516)Net cash (used in)/generated from financing activities(62,410)604,31481,489Net increase/(decrease) in cash and cash equivalents76,14214,713(37,740)Cash and cash equivalents at beginning of year14,82590,967105,680Cash and cash equivalents at end of year90,967105,68067,940 F-19Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.3 Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, disclosure of contingent assets, long-lived assets and liabilities at the dates of the financial statements and the reportedamount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, the Company’smanagement reviews these estimates based on information that is currently available. Changes in facts and circumstances may cause the Company to reviseits estimates. Significant accounting estimates reflected in the Group’s consolidated financial statements include, but are not limited to, the allowance forfinance lease receivables, useful lives of property, equipment and software, amortization period of intangible assets, financial derivatives, guarantee liability,business combination, goodwill impairment and forfeiture rate of share-based compensation. 2.4 Fair value measurements Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to berecorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that marketparticipants would use when pricing the asset or liability. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that issignificant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value: Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active marketsLevel 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices inmarkets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market dataLevel 3 — Unobservable inputs which are supported by little or no market activity Financial instruments of the Company primarily comprise of cash equivalents, short-term investment, accounts receivable, finance lease receivables, short-term borrowings, accounts payable, derivative liabilities, guarantee liabilities and deposit of interests collected from customers and payable to financingpartners. As of December 31, 2017 and 2018, their carrying values approximated their fair values because of their generally short maturities. The fair value ofthe guarantee liabilities recorded at the inception of the loan was estimated based on the third-party appraisal’s report. F-20Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.5 Foreign currencies The Group uses Renminbi (“RMB”) as its reporting currency. The USD (“US$”) is the functional currency of the Group’s entities incorporated in CaymanIslands, British Virgin Islands and Hong Kong, and the RMB is the functional currency of the Group’s PRC subsidiaries. Transactions denominated in other than the functional currencies are translated into the functional currency of the entity at the exchange rates prevailing onthe transaction dates. Assets and liabilities denominated in other than the functional currency are translated at the balance sheet date exchange rate. Theresulting exchange differences are recorded in the Consolidated Statements of Comprehensive Loss. The financial statements of the Group are translated from the functional currency to the reporting currency, RMB. Assets and liabilities of the subsidiaries aretranslated into RMB using the exchange rate in effect at each balance sheet date. Income and expenses are translated at the average exchange rates prevailingfor the year. Foreign currency translation adjustments arising from these are reflected in the accumulated other comprehensive income. The exchange ratesused for translation on at the end of the year of 2017 and 2018 were US$1.00=RMB 6.5342 and RMB 6.8632, respectively, representing the index ratesstipulated by the People’s Bank of China. Transactions of the Consolidated Balance Sheets, the Consolidated Statements of Comprehensive Loss and the Consolidated Statements of Cash Flows fromRMB into US$ as of and for the year ended December 31, 2018 are solely for the convenience of the readers and were calculated at the rate ofUS$1.00=RMB6.8632, representing the index rates stipulated by the People’s Bank of China. No representation is made that the RMB amounts could havebeen, or could be, converted, realized or settled into US$ at that rate on December 31, 2018, or at any other rate. F-21Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.6 Cash and cash equivalents Cash includes currency on hand and deposits held by financial institutions that can be added to or withdrawn without limitation. Cash equivalents representshort-term, highly liquid investments that are readily convertible to known amount of cash and with original maturities from the date of purchase of generallythree months or less. 2.7 Restricted cash and short-term investment Cash restricted as to withdrawal or for use or pledged as security is reported separately on the face of the Consolidated Balance Sheets, and is not included inthe total cash and cash equivalents in the Consolidated Statements of Cash Flows. In the ordinary course of business, the third-party financing partners offerfinancing solutions to buyers (the “Borrowers”) and the Company is required to provide a guarantee (Note 2.12 guarantee liabilities). As a result, theCompany, as the guarantor, is required to maintain a separate guarantee fund, held as an escrow account with the third-party financing partners. Thisguarantee fund is required to be maintained at a fixed percentage of the balance of all loans outstanding. As of December 31, 2017 and 2018, the restrictedcash in relation to Guarantee represented 9.6% and 7.5% of the outstanding facilitated loan balance, respectively. Short-term investments are mainly comprised of time deposits and investment products placed with banks with original maturities longer than three monthsbut less than one year. 2.8 Inventory Inventories comprise of new cars, GPS devices, auto check equipments and others. Inventories are valued at the lower of cost or market. Cost of inventories isdetermined by the weighted-average method. Adjustments are recorded to write down the carrying amount of any obsolete and excess inventory to itsestimated net realizable value. The Group continually evaluates the recoverability based on assumptions about future customer demand and marketconditions. The evaluation may take into consideration inventory aging, expected demand, anticipated sales price, and other factors. The write-down is equalto the difference between the cost of inventory and the estimated market value based upon assumptions about future customer demand and marketconditions. As of December 31, 2017, inventories mainly included GPS devices, auto check equipments and new cars of RMB2.5 million, RMB1.4 millionand RMB72.6 million, respectively. As of December 31, 2018, inventories mainly included GPS devices and auto check equipments of RMB8.1 million andRMB1.4 million, respectively. 2.9 Accounts receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. The Group makes credit assessments of customers to assess thecollectability of contract amounts prior to entering into contracts. The Group makes specific allowance for doubtful accounts when facts and circumstancesindicate that the receivable is unlikely to be collected. The allowance of accounts receivable was nil as of December 31, 2017 and 2018. F-22Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.10 Advance to consumers on behalf of financing partners The Group facilitates loans extended by third-party financing partners to consumers through its online platform. The Group started to cooperate with third-party financing partners beginning September 2015. From September 2015, the third-party financing partners provided all the funds for the consumer loans,while the Group provides services to facilitate such financing transactions. Pursuant to the cooperation agreements entered into with third-party financingpartners, for the purpose of registering the collaterals over the cars purchased by consumers with relevant government authorities, the Group advances thefunds needed to purchase the car to the consumer on financing partners’ behalf to the applicable car dealers directly. The balance represents a legal claim ofthe Group from third-party financing partners. The third-party financing partners shall pay the corresponding amount to the Group as agreed in thecorporation agreements. As of December 31, 2017 and 2018, the advances to consumers on behalf of financing partners were RMB827.4 million andRMB521.9 million, respectively. 2.11 Financial lease receivables Financial lease receivables include dealer inventory financing receivables and receivables generated from finance lease arrangements. The Group provides short-term inventory financing to certain selected car dealers. Those car dealers can apply and obtain loans through the Easy Loanprogram. The Group provides funding to the dealer and may in turn obtain financing from one of our financing partners to fund the Easy Loan program. Inorder to fund the Easy Loan program, the Group and a third-party financing partner enter into a financing business cooperation agreement, which establishesthat loans provided to dealers are made with direct connection to the financial lease contracts entered into between the Group and the dealers for theunderlying cars. Accordingly, the Group is considered as the primary obligor in the lending relationship and therefore records the liabilities to the third-partyfinancing partner on its Consolidated Balance Sheets. Consequently, the Group considers that the financial lease receivables generated from financial leasecontracts with car dealers are not settled or extinguished. Therefore, the Group continues to account for the financial lease receivables on its ConsolidatedBalance Sheets. The Group started to cooperate with third-party financing partners from September 2015. Before September 2015, the Group entered into finance leasearrangements with consumers who needed financing for car purchases. In late 2018, the Group started to provide funds in the form of financial leaseagreements to selected Borrowers in addition to the financing facilitated by the Group for the purchase of the cars. Financial lease receivables are measured at amortized cost and reported on the Consolidated Balance Sheets at outstanding principal adjusted for theallowance for credit losses. Allowance for financial lease receivables is provided when the Group has determined the balance is impaired. F-23Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.12 Guarantee liabilities The third-party financing partners offer financing solutions to the Borrowers and the Company is required to provide a guarantee in the event of default. The financial guarantee is within the scope of ASC Topic 460, Guarantees. The portion of the contract consideration that relates to ASC 460 must first beallocated to the guarantee, with the residual portion of the transaction price being recorded under ASC Topic 606, “Revenue from Contracts with Customers”.The liability is recognized at fair value at the inception of the guarantee. Subsequent to the initial recognition of the guarantee liability, the Company’s guarantee obligations are measured in a combination of two components:(i) ASC 460 component and (ii) ASC 450 component. The liability recorded based on ASC 460 is determined on a contract-by-contract basis and is reducedas the Company is released from the underlying risk, meaning as the loan is repaid by the Borrower or when the financing partners are compensated in theevent of a default. The liability is reduced only as the Company is released from the underlying risk. This component is a stand ready obligation which is notsubject to the probable threshold used to record a contingent obligation. The other component is a contingent liability determined using historicalexperience of borrower defaults, representing the obligation to make future payments, measured using the guidance per ASC 450, Contingencies. Subsequentto the initial recognition, the guarantee obligation is measured at the greater of the amount determined per ASC 460 (guarantee liability) and the amountdetermined based on ASC 450 (contingent liability). As stated in ASC 460-10-35-1, the guarantee liability should generally be reduced by recording a creditto net income as the guarantor is released from the guaranteed risk. Accordingly, the guarantee liability is recognized in “gains from guarantee liability” inthe statements of comprehensive loss by a systematic and rational amortization method, e.g. over the term of the loan. As of December 31, 2017 and 2018, the amounts of maximum potential future payments that the Group could be required to make under the guarantee wereRMB14.8 billion and RMB27.6 billion, respectively. Based on management assessment, the estimated value of collateral approximated amounts ofmaximum potential future payments. 2.13 Property, equipment and software, net Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using thestraight-line method over the following estimated useful lives, taking into account any estimated residual value: Electronic equipment3 yearsFurniture5 yearsVehicles and motors4 yearsSoftware5 yearsLeasehold improvementlesser of the term of the lease or the estimated useful lives of the assets The Company recognized the gain or loss on the disposal of property, equipment and software in the Consolidated Statements of Comprehensive Loss. 2.14 Intangible assets, net Intangible assets represent software copyright and supplier relationship acquired. These intangible assets are carried at acquisition cost less accumulatedamortization and amortized on a straight line basis over their estimated useful lives of the respective assets, which is usually 5 years. Separately identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of suchassets may not be recoverable. F-24Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.15 Goodwill In accordance with ASC 805 Business Combination, goodwill represents the excess of the purchase consideration over the fair value of assets and liabilitiesof businesses acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually, or more frequently if events or changes in circumstancesindicate that it might be impaired based on the requirements of ASC 350-20. In accordance with the FASB guidance on “Testing of Goodwill forImpairment,” we have elected to perform a qualitative assessment to determine whether the two-step impairment testing of goodwill is necessary. In thisassessment, we consider primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specificinformation related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than thecarrying amount, the quantitative impairment test is performed. Otherwise, no further testing is required. Recoverability of goodwill is evaluated using a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying value. If the fair value of a reporting unit exceeds the carrying valueof the net assets assigned to a reporting unit, goodwill is considered not impaired and no further testing is required. If the carrying value of the net assetsassigned to a reporting unit exceeds the fair value of a reporting unit, the second step of the impairment test is performed in order to determine the impliedfair value of a reporting unit’s goodwill. Determining the implied fair value of goodwill requires valuation of a reporting unit’s tangible and intangible assetsand liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting unit’s goodwill exceedsits implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. The Company estimates total fair value of thereporting unit using discounted cash flow analysis, and makes assumptions regarding future revenue, gross margins, working capital levels, tax and cashflows of the reporting unit. 2.16 Long-term investments In accordance with ASC 323 Investment—Equity Method and Joint Ventures, the Company accounts for an equity investment over which it has significantinfluence but does not own a majority of the equity interest or otherwise controls and the investments are either common stock or in substance common stockusing the equity method. The Company’s share of the investee’s profit and loss is recognized in the earnings of the period. In accordance with ASC 325 Investment—Other, for equity investments which the Company does not have significant influence, and whose fair value is notreadily determinable, the cost method accounting is applied. Gain or losses are realized when such investments are sold or when dividends are declared orpayments are received. The Company assesses its equity investments for other-than-temporary impairment by considering factors as well as all relevant andavailable information including, but not limited to, current economic and market conditions, the operating performance of the companies including currentearnings trends, and other company-specific information such as financing situation. F-25Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.16 Long-term investments (continued) The Group also invests in convertible redeemable securities. These securities are reported at fair value, classified and accounted for as available-for-sale debtsecurities in investment securities. The treatment of a decline in the fair value of an individual security is based on whether the decline is other-than-temporary. The Group assesses its available-for-sale debt securities for other-than-temporary impairment by considering factors including, but not limited to,its ability and intent to hold the individual security, severity of the impairment, expected duration of the impairment and forecasted recovery of fair value.Investments classified as available-for-sale debt securities are reported at fair value with unrealized gains or losses, if any, recorded in accumulated othercomprehensive income as a component of shareholders’ equity. If the Group determines a decline in fair value is other-than-temporary, the cost basis of theindividual security is written down to fair value as a new cost basis and the amount of the write-down is accounted for as a realized loss charged in others, netin the Consolidated Statements of Comprehensive Loss. The fair value of the investment would not be adjusted for subsequent recoveries for increases in fairvalue. 2.17 Impairment of long-lived assets and intangible assets with definite lives Long-lived assets including intangible assets with definite lives are assessed for impairment, whenever events or changes in circumstances indicate thecarrying value of an asset may not be recoverable in accordance with ASC 360, Property, Plant and Equipment. The Company measures the carrying amountof long-lived assets against the estimated undiscounted future cash flows associated with it. The impairment exists when the estimated undiscounted futurecash flows are less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the assetexceeds its fair value. No impairment of long-lived assets was recognized for the years ended December 31, 2017 and 2018. 2.18 Deferred revenue Deferred revenue mainly represents warranty program provided by the Company. The program includes a 1-year or 20,000 kilometer warranty, covering bothmaintenance and all major structural components. As of December 31, 2017 and 2018, the deferred revenue was RMB27.6 million and RMB115.2 million,respectively. 2.19 Revenue recognition The Group primarily engages in operating used car e-commerce platforms through its mobile applications (Uxin Used Car / Uxin Auction) and websites(www.xin.com / www.youxinpai.com), facilitating used car transaction services and financing solutions offered by third-party financing partners to buyers fortheir used car purchases. Revenue principally represents transaction facilitation revenue, loan facilitation revenue and others. The Group adopted ASC Topic 606, “Revenue from Contracts with Customers” for all periods presented. Consistent with the criteria of Topic 606, the Grouprecognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expectsto receive in exchange for those goods or services. F-26Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.19 Revenue recognition(continued) To achieve that core principle, an entity should apply five steps defined under Topic 606. The Group assesses its revenue arrangements against specificcriteria in order to determine if it is acting as principal or agent. Revenue arrangements with multiple performance obligations are divided into separate unitsof accounting. Under the 2C business, for transactions with financing solutions attached, the Company identified three performance obligations - transactionfacilitation services, loan facilitation services and warranty services. The Company therefore considered the appropriate method to allocate the transactionprice to each performance obligation based on the relative standalone selling prices of the services being provided. The Company does not sell all theseservices separately, and therefore, in estimating the standalone selling price for services that are not directly observable, the Company considered the suitablemethods included in ASC 606-10-21-34, and determined the adjusted market assessment approach is the most appropriate method. When estimating therelative standalone selling prices, the Group considers selling prices of similar services. Revenue is recognized upon transfer of control of promised goods orservices to a customer. The Group, from time to time, provides cash incentives to both buyers and sellers. These incentives are given in the form of either a cash bonus to sellers or adiscount coupon to buyers, and are applied to the same transaction. As these incentives were provided without any distinct good or service in return, theseincentives have been recorded as reduction of revenue, pursuant to the guidance under ASC 606. Revenue is recorded net of cash incentives and value-added-tax collected from customers, which are subsequently remitted to government authorities. 2C The Company’s online platform and offline infrastructure facilitates used car dealers to list and sell their used cars to individual consumers via cross-regionalservice and intra-regional service. The Company started its cross-regional transaction facilitation service in the first quarter of 2018. The cross-regionaltransaction facilitation services help individual consumers complete their purchases of cars without having the consumers physically inspect the cars on-site,which primarily apply for the transactions when the consumers are located in different cities from where the cars are located; whereas intra-regionaltransaction facilitation services cater to local individual consumers. The Group’s offline infrastructure provides consumers with vehicle inspection, paymentand settlement, delivery and fulfilment services, and warranty services. The Group does not charge transaction facilitation services fees to car dealers forcertain transactions without financing solutions attached. For those transactions with financing solutions offered by third-party financing partners, the Grouphas identified three performance obligations — transaction facilitation services, loan facilitation services and warranty services. The revenue relating towarranty services is deferred and recognized over the warranty period as the Company stands ready to perform during that period. The transaction facilitationrevenue is recognized at a point in time when the service is rendered, which occurs upon the completion of the successful transaction. The Group earns loanfacilitation revenue from the Borrowers along with the cross-regional and intra-regional transaction facilitation services. The Group provides intermediarymatching services to both the Borrowers and the third-party financing partner, which the Group describes as a loan facilitation service. The performanceobligation is satisfied at a point in time upon completion of a transaction, and the loan facilitation revenue is recognized accordingly when the service isrendered. 2B Launched in 2011, the Company’s 2B business, Uxin Auction(“优信拍”), caters to business buyers with a comprehensive suite of solutions, connectingbusinesses with one another across China, helping them source vehicles, optimizing their turnover and facilitating cross-regional transactions. Businesssellers include used car dealers, 4S dealership, which are dealerships that are authorized to sell the products of a single brand of automobiles and provide keyautomobile-related services, car rental companies, auto manufactures and large corporation that may need to dispose of large fleets of used cars. Cars are soldthrough Uxin Auction through online auctions. The Group earns transaction facilitation income upon each successful close of an auction from buyers.Transaction facilitation income, which is a certain percentage of the selling price of the underlying car or a minimum amount is recognized at a point in timefollowing the transfer of control of such services to the customer, which occurs upon the completion of a successful transaction. As the Company does notassume inventory risk for the used cars, it is considered to be an agent in accordance with ASC 606. Accordingly, the Company recognizes the transactionfacilitation income when the performance obligation is satisfied. F-27Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.19 Revenue recognition (continued) Others Other revenue is mainly comprised of sales of new cars, commission of salvage cars sales, interest income of financial lease, etc. The revenue from sales of new cars is recognized when title of the cars is transferred to buyer. Commission income of salvage cars sales is charged to buyersand recognized upon completion of the transaction. Prior to September 2015, the Group provided funds to consumers in the form of financial lease agreements. The Group also provides Easy Loan program toselected dealers in the form of financial lease agreements. In late 2018, the Group started to provide funds in the form of financial lease agreements to selectedBorrowers in addition to the financing facilitated by the Group for the purchase of the cars. In these arrangements, the Group is considered the originator ofthe financing and held such creditor’s rights. The Group generates interest income from these arrangements. Interest income is recognized on a timeproportion basis, taking into account of the principal outstanding and the effective interest rate over the period to maturity, which is determined that suchincome will accrue by the Group. Remaining performance obligations Revenue allocated to remaining performance obligations represents that portion of the overall transaction price that has been received (or for which theGroup has an unconditional right to payment) allocated to performance obligations that the Group has not yet fulfilled, which is presented as deferredrevenue that has not yet been recognized. As of December 31, 2018, the aggregate amount of the transaction price allocated to remaining performanceobligations was RMB115.2 million, reflecting the Group’s remaining obligations. The Group expects to recognize approximately 100% of the revenue overthe next 12 months. 2.20 Value-added-tax (“VAT”) and surcharges The Company’s subsidiaries and VIEs are subject to value-added tax and related surcharges on the revenues earned for services provided in the PRC. Theapplicable value-added-tax rate for general VAT payers is set out in the following table. Type of service Applicable VAT rate (%)Sales of cars17%/16%Transaction facilitation6%Loan facilitation6%Other services6% The surcharges (i.e. urban construction and maintenance tax, educational surtax, local educational surtax), vary from 11% to 13% of the value-added-taxdepending on the tax payer’s location. The surcharges are recorded in the cost of revenue in the Consolidated Statements of Comprehensive Loss. F-28Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.21 Cost of revenues Cost of revenues primarily consists of salaries and benefits expenses, cost of title transfer and registration, delivery and logistics cost, rental for transactioncenters, platform maintenance cost, GPS tracking device costs, cost of warranty services provided, and cost of new cars sold. 2.22 Sales and marketing expenses Sales and marketing expenses primarily consist of salaries and benefits expenses for sales and marketing personnel, advertising and promotion expenses,rental expenses for selling stores. Advertising and promotion expenses primarily include branding advertisements, online traffic acquisition costs and costsincurred in other marketing activities. Advertising costs are expensed as incurred and the total amounts charged to the Consolidated Statements ofComprehensive Loss amounted to approximately RMB394.9 million, RMB1,308.2 million and RMB1,152.6 million for the years ended December 31, 2016,2017 and 2018, respectively. 2.23 Research and development expenses Research and development expenses primarily consist of salaries and benefits expenses, fees for outsourced technical services and depreciation of servers andcomputers relating to research and development. All research and development costs are expensed as incurred. Software development costs required to be capitalized under ASC 350-40, Internal-UseSoftware, were not material to our consolidated financial statements. 2.24 General and administrative expenses General and administrative expenses primarily consist of salaries and benefits and share-based compensation for employees engaged in management andadministration positions or involved in general corporate functions, office rental, professional service fees and depreciation. 2.25 Share-based compensation The Company follows ASC 718 to determine whether a share option or a restricted share unit should be classified and accounted for as a liability award orequity award. All grants of share-based awards to employees and directors classified as equity awards are recognized in the financial statements based on theirgrant date fair values which are calculated using an option pricing model. The Company classifies the share-based awards granted to employees as equityaward, and has elected to recognize compensation expense on share-based awards with service condition on a graded vesting basis over the requisite serviceperiod, which is generally the vesting period. Under ASC 718, the Company applies the Binominal option pricing model in determining the fair value of options granted. ASC 718 requires forfeiture ratesto be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based compensationexpense is recorded net of estimated forfeitures such that expense is recorded only for those share-based awards that are expected to vest. F-29Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.26 Taxation Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are notassessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidatedfinancial statements, net operating loss carries forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion ofmanagement, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordancewith the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income inwhich temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in thestatement of comprehensive loss in the period of the enactment of the change. The Group considers positive and negative evidence when determining whether a portion or all of its deferred tax assets will more likely than not be realized.This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, theduration of statutory carry-forward periods, its experience with tax attributes expiring unused, and its tax planning strategies. The ultimate realization ofdeferred tax assets is dependent upon its ability to generate sufficient future taxable income within the carry-forward periods provided for in the tax law andduring the periods in which the temporary differences become deductible. When assessing the realization of deferred tax assets, the Group has consideredpossible sources of taxable income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversingtemporary differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known trend ofprofits expected to be reflected within the industry. The Group recognizes a tax benefit associated with an uncertain tax position when, in its judgment, it is more likely than not that the position will besustained upon examination by a taxing authority. For a tax position that meets the-more-likely-than-not recognition threshold, the Group initially andsubsequently measures the tax benefit as the largest amount that the Group judges to have a greater than 50% likelihood of being realized upon ultimatesettlement with a taxing authority. The Group’s liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances,such as the progress of tax audits, case law developments and new or emerging legislation. Such adjustments are recognized entirely in the period in whichthey are identified. The Group’s effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequentadjustments as considered appropriate by management. The Group classifies interest and penalties recognized on the liability for unrecognized tax benefitsas income tax expense. F-30Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.27 Business combinations and non-controlling interests The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification(“ASC”) 805 “Business Combinations.” The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred andliabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed asincurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extentof any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value ofany previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost ofacquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Consolidated Statements ofComprehensive Loss. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to theassets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination ofthe values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Consolidated Statements ofComprehensive Loss. In a business combination achieved in stages, the Company remeasures the previously held equity interest in the acquire immediately before obtainingcontrol at its acquisition date fair value and the remeasurement gain or loss, if any, is recognized in the Consolidated Statements of Comprehensive Loss. For the Company’s majority owned subsidiaries and consolidated VIEs, a non-controlling interest is recognized to reflect the portion of their equity which isnot attributable, directly or indirectly, to the Company. When the non-controlling interest is contingently redeemable upon the occurrence of a conditionalevent, which is not solely within the control of the Company, the non-controlling interest is classified as mezzanine equity. Consolidated net loss on theConsolidated Statements of Comprehensive Loss includes net loss attributable to non-controlling interests when applicable. 2.28 Loss per share Basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstandingduring the period using the two-class method. Under the two-class method, the net loss is allocated between ordinary shares and other participating securitiesbased on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to sharein the loss. Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary anddilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the conversion of the preferredshares using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares arenot included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive. F-31Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.29 Recent Accounting Pronouncements In January, 2016, the FASB issued ASU No. 2016-01 Financial Instruments—Overall (Subtopic 825-10) “Recognition and Measurement of Financial Assetsand Financial Liabilities”. This accounting standard retains the current accounting for classifying and measuring investments in debt securities and loans, butrequires equity investments to be measured at fair value with subsequent changes recognized in net income, except for those accounted for under the equitymethod or requiring consolidation. This guidance also changes the accounting for investments without a readily determinable fair value and that do notqualify for the practical expedient to estimate fair value. A policy election can be made for these investments whereby investment will be carried at cost andadjusted in subsequent periods for any impairment or changes in observable prices of identical or similar investments. For public business entities, theamendments are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities theamendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. TheCompany will apply the new standard beginning January 1, 2019 and recognize the changes in fair value for all equity investments measured at fair valuethrough net income/(loss). For investments in equity securities lacking of readily determinable fair values, the Company will elect to use the measurementalternative defined as cost, less impairments, adjusted by observable price changes. The Company anticipates that the adoption of ASU 2016-01 will nothave a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires that a lessee should recognize the assets and liabilities that arise fromoperating leases. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing itsright to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election byclass of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expenses for such leasegenerally on a straight-line basis over the lease term. The new leases standard also provides lessees with a practical expedient, by class of underlying asset, tonot separate non-lease components from the associated lease component. If a lessee makes that accounting policy election, it is required to account for thenon-lease components together with the associated lease component as a single lease component and to provide certain disclosures. For public businessentities, the amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For all otherentities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginningafter December 15, 2020. Entities were initially required to adopt the new leases standard using a modified retrospective transition method. Under thattransition method, an entity initially applies the new leases standard (subject to specific transition requirements and optional practical expedients) at thebeginning of the earliest period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, which provides another transition methodin addition to the existing transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption consistent with preparers’ requests. The Group will adopt this newguidance using additional transition method to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit beginning January 1,2019 and interim periods in the year ended December 31, 2019. The Group estimates approximately RMB 250 million to RMB 300 million would berecognized as total right-of-use assets and total lease liabilities on consolidated balance sheets as of January 1, 2019. Other than disclosed, the Group doesnot expect the new standard to have a material impact on its remaining consolidated financial statements. F-32Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.29 Recent Accounting Pronouncements (continued) In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU 2016-13, Financial Instruments—Credit Losses(Topic 326): Measurement of Credit Losses on Financial Instruments. For public business entities that are U.S. Securities and Exchange Commission (SEC)filers, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Forall other public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, including interim periodswithin those fiscal years. For all other entities, including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 onplan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal yearsbeginning after December 15, 2021. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018,including interim periods within those fiscal years. The Company elected to adopt this new guidance for the years ended December 31, 2020 and interimperiods in the year ended December 31, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for whichthe Company is required to recognize an allowance based on its estimate of expected credit loss. The Company is currently evaluating the impact of this newguidance on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments.ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, withthe objective of reducing diversity in practice. The amendments in this Update are effective for public business entities for fiscal years beginning afterDecember 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning afterDecember 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interimperiod. The Company elected to adopt this new guidance as non-public entity for the years ended December 31, 2019 and interim periods in the year endedDecember 31, 2020. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) (“ASU 2016-18”). This ASU affects all entities that have restrictedcash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 requires that a statement of cash flowsexplain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within thosefiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal yearsbeginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The Company elected to adopt this new guidanceas non-public entity for the years ended December 31, 2019 and interim periods in the year ended December 31, 2020. The Company is currently evaluatingthe impact of this new guidance on its consolidated financial statements. F-33Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED) 2.29 Recent Accounting Pronouncements (continued) In January 2017, the FASB issued ASU No. 2017-04 Intangibles—Goodwill and Other (Topic 350). Under the amendments in this Update, an entity shouldperform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognizean impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceedthe total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill onthe carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Board also eliminated the requirements for anyreporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of thegoodwill impairment test. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in thisUpdate for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entity that is not an SECfiler should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020.All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any interim goodwillimpairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted for interim or annual goodwill impairment tests performed ontesting dates after January 1, 2017. The Company elected to adopt this new guidance for the years ended December 31, 2020 and interim periods in the yearended December 31, 2020. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements. In February 2017, the FASB issued ASU No. 2017-05 Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). Theamendments in this Update clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset.The amendments define the term in substance nonfinancial asset, in part, as a financial asset promised to a counterparty in a contract if substantially all of thefair value of the assets (recognized and unrecognized) that are promised to the counterparty in the contract is concentrated in nonfinancial assets. Ifsubstantially all of the fair value of the assets that are promised to the counterparty in a contract is concentrated in non-financial assets, then all of thefinancial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic 610-20. The amendments to this Update alsoclarify that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Theamendments in this Update are effective at the same time as the amendments in Update 2014-09. For public entities, the amendments are effective for annualreporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Public entities may apply theguidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.For all other entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2018, and interim reportingperiods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance earlier as of annual reporting periodsbeginning after December 15, 2016, including interim reporting periods within that reporting period. The Company elected to adopt this new guidance asnon-public entity for the years ended December 31, 2019 and interim periods in the year ended December 31, 2020. The Company is currently evaluating theimpact of this new guidance on its consolidated financial statements. F-34Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 3. BUSINESS COMBINATION During the year ended December 31, 2017, the Company has completed two business combinations. The results of the acquired entities’ operations havebeen included in the Company’s consolidated financial statements since their respective dates of acquisition. Acquisition of Beijing Youxin Chefang Automotive Technical Service Co., Ltd. (“Chefang”) Chefang is a company that engages in services related to car maintenance. In order to enhance the service quality to consumers, on October 8, 2015, theCompany acquired 26% ordinary equity interests in Chefang with the consideration of RMB10 million. On September 28, 2016, the Company paid RMB10million with which the acquired ordinary equity interests in Chefang increased to 40.96%. On May 31, 2017, the Company acquired further 10.04% ordinaryequity interest in Chefang with the consideration of RMB3 million in cash and obtained the power to control Chefang with the accumulated acquiredordinary equity interests stepped up to 51%. These investments were accounted for under equity method due to significant influence the Group has overChefang until the control was obtained and the investments were in the form of ordinary shares. The Group recognized a gain of RMB3.9 million upon theacquisition of the remeasurement of previously held equity interests. In the fourth quarter of 2018, the Company acquired further 49% ordinary equityinterest in Chefang with the consideration of RMB 2.0 million in cash and controlled Chefang with the accumulated acquired ordinary equity interestsstepped up to 100%. The Company completed the valuations necessary to assess the fair values of the tangible assets acquired and liabilities assumed, resulting from which theamount of goodwill was determined and recognized as of the date of acquisition. The following table summarizes the estimated aggregate fair values of theassets acquired and liabilities assumed as of the date of acquisition: As of May 31, 2017RMB Fair value of previously held equity interests6,973Purchase consideration to achieve control3,000Total purchase consideration9,973 Cash and cash equivalents3,659Accounts receivable, net57Other receivables, net4,439Inventory46Prepaid expense and other current assets233Property, equipment and software, net3,151Total assets11,585 Accounts payable(499)Other payables and accruals(523)Total liabilities(1,022) Fair value of net asset acquired10,563 Non-controlling interests8,342 Goodwill7,752 There were no identifiable intangible assets from the acquisition of Chefang. In accordance with ASC 350, goodwill is not amortized but is tested forimpairment and is not deductible for tax purposes. RMB 3.7 million goodwill impairment loss was recorded in the year ended 2018. F-35Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 3. BUSINESS COMBINATION (CONTINUED) Based on an assessment of Chefang’s financial performance, Chefang was not considered material to the Group. Thus, management concluded that thepresentation of pro forma financial information and the revenue and net income of Chefang during the period since the acquisition date was immaterial. Acquisition of Baogu Vehicle Technology Service (Beijing) Co., Ltd. (“Baogu”) In order to enhance the service quality to consumers, in June 2015, the Company acquired 30% ordinary shares of Baogu, a vehicle warranty service provider,and accounted for the investment and equity method. The purchase consideration was RMB12.2 million. In August 2017, the Company acquired theremaining 70% ordinary shares of Baogu with consideration of RMB4 million in cash and obtained the power to control Baogu. The investment in the first 30% of ordinary shares of Baogu was accounted for under equity method due to significant influence the Group had over Baoguuntil the Group obtained control of Baogu. The Group recognized a gain of RMB1.3 million upon the acquisition of the remeasurement of previously heldequity interests. The Company completed the valuations necessary to assess the fair values of the tangible assets acquired and liabilities assumed, resulting from which theamount of goodwill was determined and recognized as of the date of acquisition. The following table summarizes the estimated aggregate fair values of theassets acquired and liabilities assumed as of the date of acquisition: As of August 31, 2017RMB Fair value of previously held equity interests1,714Purchase consideration to achieve control4,000Fair value of total consideration5,714 Cash and cash equivalents307Accounts receivable, net12,621Other receivables, net7,352Prepaid expenses and other current assets 4,083Property, equipment and software, net107Total assets24,470 Accounts payable(280)Deferred revenue(21,959)Other payables and accruals(691)Total liabilities(22,930) Fair value of net assets acquired1,540 Goodwill4,174 There was no identifiable intangible assets from the acquisition of Baogu. In accordance with ASC 350, goodwill is not amortized but is tested forimpairment and is not deductible for tax purposes. No impairment was identified as of December 31, 2018. Based on an assessment of Baogu’s financial performance, Baogu was not considered material to the Group. Thus, management concluded that thepresentation of pro forma financial information and revenue and net income of Baogu during the period since the acquisition date was immaterial. F-36Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 3. BUSINESS COMBINATION (CONTINUED) During the year ended December 31, 2018, the Group has completed a business combination. The results of the acquired entity’s operations have beenincluded in the Group’s consolidated financial statements since its respective date of acquisition. Acquisition of Zhejiang Dongwang Internet Technology Co., Ltd. (“Dongwang”) Dongwang is a company that engages in salvage car auction business in Zhejiang province. On June 1, 2018, the Company acquired 100% ordinary equityinterests from Dongwang’s founder with cash consideration of RMB 62.99 million and newly-issued Fairlubo ordinary shares of 20,225,145 (par valueUS$0.0001). The fair value of ordinary shares on June 1, 2018 was US$ 0.0985. The Company conducted the valuations necessary to assess the fair values of the tangible assets acquired and liabilities assumed, resulting from which theamount of goodwill was determined and recognized as of the date of acquisition. The following table summarizes the estimated aggregate fair values of theassets acquired and liabilities assumed as of the date of acquisition: As of June 1, 2018RMB Cash consideration62,994Fair value of ordinary shares of Fairlubo (US$0.0001 par value, 20,225,145 shares)1,993Total purchase consideration64,987 Cash and cash equivalents743Accounts receivable, net811Other receivables, net36,961Amount due from related party21,486Prepaid expense and other current assets887Property, equipment and software, net3,334Intangible asset16,850Total assets81,072 Accounts payable(1,792)Other payables and accruals(48,326)Deferred tax liabilities(4,213)Total liabilities(54,331) Fair value of net asset acquired26,741 Goodwill38,246 There were identifiable intangible assets from the acquisition of Dongwang, including customer relationship, software license and non-competitiveagreements. Those intangible assets were recognized and measured at fair value upon acquisition and amortized over five years. In accordance with ASC 350,goodwill is not amortized but is tested for impairment and is not deductible for tax purposes. No impairment was identified as of December 31, 2018. Based on an assessment of Dongwang’s financial performance, Dongwang was not considered material to the Group. Thus, management concluded that thepresentation of pro forma financial information and the revenue and net income of Dongwang during the period since the acquisition date was immaterial. F-37Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 4. REDEEMABLE NON-CONTROLLING INTERESTS Fairlubo, the Group’s non-wholly owned subsidiary had its Series B financing in January, 2016. The Company along with three other investors contributed inFairlubo’s Series B financing. These three shareholders’ contributions in Fairlubo were accounted for as the Group’s redeemable non-controlling interests,and were classified as Mezzanine equity. Pursuant to Fairlubo’s Series B shareholders agreement, upon occurrence of certain events (e.g. the Company’ssuccessful listing in capital markets), the Series B held by the Group’s non-controlling interests holders had the option to convert their equity interests inFairlubo into the Company’s shares based on the mechanism that set out in Fairlubo’s Article of Association (the “Share Swap”). In addition, the holders ofFairlubo’s Series B also had the option to request Fairlubo to redeem those shares under certain circumstance (e.g. a qualified initial public offering ofFailubo has not occurred by the fourth anniversary after the issuance of Series B preferred shares). Based on the accounting assessment and valuation work conducted by an independent appraiser, the Group determined the aforementioned Shares Swapfeature and redemption feature embedded in the Series B preferred shares was required to be bifurcated and accounted for as derivative liabilities. The SharesSwap had been completed by the issuance of the Company’s 13,026,713 Class A ordinary shares to non-controlling shareholders upon IPO. As of December 31, 2017, the fair values of the Share Swap feature and the redemption feature which were required to be bifurcated and accounted for asderivative liabilities are as follows: As ofDecember 31, 2017 December 31, 2018RMB RMB Derivative liabilities — Share Swap feature of redeemable non-controlling interests119,086—Derivative liabilities — Redemption feature of redeemable non-controlling interests49,778—168,864— 5. ADVANCE TO CONSUMERS ON BEHALF OF FINANCING PARTNERS As ofDecember 31, 2017 December 31, 2018RMB RMB Advance to consumers on behalf of financing partners827,417521,908 The Group facilitates loans extended by third-party financing partners to consumers through the online platform. From September 2015, the third-partyfinancing partners provide all the funds for the consumer loans, while the Group provides services to facilitate such financing transactions. Pursuant to thecooperation agreements entered into with third-party financing partners, for the purpose of registering the collateral over the car purchased by consumers withrelevant government authorities, the Group advances the funds needed to purchase the car to the consumer on financing partners’ behalf to the applicable cardealers directly. The third-party financing partners shall pay the corresponding amount to the Group as agreed in the corporation agreements. For the balance of RMB 521.9 million as at December 31, 2018, all have been subsequently paid by financing partners. F-38Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 6. LOAN RECOGNIZED AS A RESULT OF PAYMENT UNDER THE GUARANTEE As ofDecember 31, 2017 December 31, 2018RMB RMB Loan recognized as a result of payment under the guarantee441,860810,327Less: allowance for doubtful accounts(189,305)(256,639)252,555553,688 The movement of allowance for the years ended December 31, 2016, 2017 and 2018 consisted of the following: Year endedDecember 31, 2016 Year endedDecember 31, 2017 Year endedDecember 31, 2018RMB RMB RMB Beginning—(7,222)(189,305)Addition(6,893)(184,586)(257,953)Adjustment (i)(711)(13,103)152,862Write-off38215,60637,757Ending(7,222)(189,305)(256,639) The third-party financing partners offer financing solutions to the Borrowers and the Group is required to provide a guarantee. In the event of a paymentdefault from the Borrower, the Group is required to repay the monthly installment or full amount of outstanding loan to the financing partner as the guarantor.As such, the Group recognized loan receivables as a result of payment under the guarantee deducted by an allowance to its expected recoverable amounts inthe consolidated balance sheets. Loan recognized as a result of payment under the guarantee of RMB 343.2 million was pledged as collateral for long-term borrowings of RMB120.8 millionand current portion of long-term borrowings of RMB278.6 million (Note 15). (i) On a normal basis, adjustments occur when either further revaluations of allowance for doubtful accounts are considered necessary therefore adjustments ofprovisions are needed, or settlements from the Borrowers are received to reverse the balances. Adjustments may also occur when certain loans recognized as aresult of payments under the guarantees are bought out by certain new non-bank financing institutions without any recourse terms in 2018. F-39Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 7. ADVANCE TO SELLERS As ofDecember 31, 2017 December 31, 2018RMB RMB Advance to sellers246,287692,714 When facilitating used car transaction, the Group connect the sellers and buyers and provides service in relation to the cash flow remittance, i.e. the Groupcollects the cash from buyers and remits to sellers. The balance represents the prepayments to sellers by the Group, which are subsequently collected from thebuyers in a short period of time. No allowance of advance to sellers was provided at December 31, 2017 and 2018, since no collection issues occurred in thepast, The balance included advance to sellers in 2B business, total of RMB 246.3 million and RMB 236.2 million as of December 31, 2017 and 2018 respectively,and advance to sellers in 2C cross-regional business, total of nil and RMB 449.8 million as of December 31, 2017 and 2018 respectively. Advance to sellers of RMB 21.3 million was pledged as collateral for short-term borrowings of RMB 20.0 million (Note 15). 8. OTHER RECEIVABLES, NET As ofDecember 31, 2017 December 31, 2018RMB RMB Deposits in non-bank financing partners (i)52,000502,550Rental and other deposits79,09877,902Staff advance22,94055,652Receivables from third-party payment settlement platform78,85634,787Others19,02742,970251,921713,861Less: allowance for doubtful accounts(272)(6,457)251,649707,404 (i) In order to diversify its funding sources, the Company has been making efforts to broaden its collaboration with more financing partners in addition tothe three existing major financing partners, including some non-bank financial institutions. In the ordinary course of business, the third-party financingpartners offer financing solutions to the Borrowers and the Company is required to provide a guarantee. For the financing partners which are banks, theCompany, as the guarantor, is required to maintain a separate guarantee fund, held as an escrow account with the financing partners which is recorded as“Restricted cash”(Note 2.7). For the new financing partners which are non-bank financial institutions, the Company, as the guarantor, is required todeposit a separate guarantee fund with the non-bank financing partners, which is recorded as deposits. F-40Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 8. OTHER RECEIVABLES, NET(CONTINUED) The movement of allowance for doubtful accounts for the years ended December 31, 2016, 2017 and 2018 consisted of the following: Year endedDecember 31, 2016 Year endedDecember 31, 2017 Year endedDecember 31, 2018RMB RMB RMB At the beginning of year—(269)(272)Addition(269)(3)(23,608)Write-off——17,423At the ending of year(269)(272)(6,457) 9. PREPAID EXPENSES AND OTHER CURRENT ASSETS As of December 31, 2017 December 31, 2018 RMB RMB Prepaid marketing expense56,745218,145VAT-input deductible80,58964,237Prepaid rental expense57,18846,581Prepaid consulting and professional service fees10,80937,236Prepaid non-banking financing partners service fees18,60726,295Others25,83124,820249,769417,314 F-41Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 10. FINANCIAL LEASE RECEIVABLES Financial lease receivables include dealer inventory financing receivables and receivables generated from finance lease arrangements entered into withconsumers. The following table presents financial lease receivables as of December 31, 2016, 2017 and 2018, respectively. As ofDecember 31,2016 December 31,2017 December 31,2018 RMB RMB Financial lease receivables due from car dealers355,574432,491239,854 Financial lease receivables due from consumers60,51210,42761,547Less: allowance for doubtful accounts(2,624)(4,225)(6,890)57,8886,20254,657 Financial lease receivables, net413,462438,693294,511 The following presents the aging of past-due financial lease receivables as of December 31, 2017: 1-90 days Above 90 days Total past due Current TotalRMB RMB RMB RMB RMB Financial lease receivables due from car dealers———432,491432,491Financial lease receivables due from consumers2,8087,61910,427—10,4272,8087,61910,427432,491442,918 The following present the aging of past-due financial lease receivables as of December 31, 2018: 1-90 days Above 90 days Total past due Current TotalRMB RMB RMB RMB RMB Financial lease receivables due from car dealers———239,854239,854Financial lease receivables from consumers—7,7487,74853,79961,547—7,7487,748293,653301,401 F-42Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 10. FINANCIAL LEASE RECEIVABLES (CONTINUED) The following lists the components of the net investment in financial lease receivables due from car dealers and consumers as of December 31, 2017 and2018. As ofDecember 31,2016 December 31,2017 December 31,2018RMB RMB RMB Total minimum lease payments to be received (i)419,673446,163303,273Less: Allowance for uncollectibles(2,624)(4,225)(6,890)Net minimum lease payments receivable417,049441,938296,383Less: unearned income(3,587)(3,245)(1,872)Net investment in direct financing and sales-type leases413,462438,693294,511 (i) As of December 31, 2016, 2017 and 2018, all of the minimum lease payments would be paid in a year. There is no contingent rental for the year endedDecember 31, 2016, 2017 and 2018, respectively. 11. PROPERTY, EQUIPMENT AND SOFTWARE, NET Property, equipment and software, net, consist of the following: As of December 31, 2017 December 31, 2018 RMB RMB CostComputer equipment125,962194,513Leasehold improvement106,947147,704Software19,19823,500Furniture13,63819,611Vehicle and motor7,75412,220Construction in progress18,08213,629Total property, equipment and software291,581411,177 Less: accumulated depreciation and amortizationComputer equipment(56,528)(90,134)Leasehold improvement(64,203)(100,269)Software(4,418)(6,523)Furniture(5,706)(8,037)Vehicle and motor(4,101)(6,943)Total accumulated depreciation and amortization(134,956)(211,906) Net book value156,625199,271 The total amounts charged to the Consolidated Statements of Comprehensive Loss for depreciation and amortization expenses amounted to approximatelyRMB49.3 million, RMB68.2 million and RMB88.8 million for the year ended December 31, 2016, 2017 and 2018, respectively. F-43Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 12. INTANGIBLE ASSETS, NET Acquired intangible assets, net, consist of the following: As of December 31, 2017 December 31, 2018 RMB RMB Supplier relationship9,40018,200Software copyright3,0007,000Others5,95210,002Total intangible assets18,35235,202 Less: amortization(8,403)(14,023)Net book value9,94921,179 The total amounts charged to the Consolidated Statements of Comprehensive Loss for amortization expenses amounted to approximately RMB3.2 million,RMB3.7 million and RMB5.6 million for the year ended December 31, 2016, 2017 and 2018, respectively. The annual estimated amortization expense for intangible assets subject to amortization for the five years is as follows: As ofDecember 31, 2018 RMB 20196,87720205,66120213,85020223,37020231,42121,179 F-44Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 13. LONG-TERM INVESTMENTS The Group’s long-term investments consist of the following: As of December 31, 2017 December 31, 2018 RMB RMB Available-for-sales debt security investmentOrange Inc.39,20541,179 Equity method investmentsJincheng Consumer Finance (Sichuan) Co., Ltd. (“Jincheng”)—236,642Weiche Information Technology Co., Ltd. (“Weiche”)—2,006—238,648 Cost method investmentsClearVue Pony Holdings Limited. (“ClearVue Pony”)—68,632Bai’an Online Property Insurance Co., Ltd. (“Bai’an”)1,4231,4231,42370,055 Total long-term investments40,628349,882 F-45Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 13. LONG-TERM INVESMENTS (CONTINUED) Major investments made by the Company during the year ended December 31, 2017 and 2018 are summarized as follows: Investment accounted for as available-for-sale debt security investment Investment in Orange Inc. In June 2017, the Group subscribed convertible preferred shares of Orange Inc., a technology company, for a consideration of US$6 million. The Group’sinvestment represented 10.26% of the equity interests, on an if-converted basis. The preferred shares were not considered in-substance ordinary shares as theyprovide substantive redemption rights, liquidation rights and fixed dividends to the Group, which are not available to ordinary shareholders. Thus theinvestment was classified as an available-for-sale investment in debt securities. Investments accounted for using equity method Investment in Jincheng In September 2017, the Company invested in Jincheng, a professional consumer financial service company. The Company acquired 19% ordinary equityinterest with a total consideration of RMB 233.0 million. The investment was not closed until October 2018. The Company exercises significant influence inJincheng and therefore accounts for this as a long-term investment using equity method. Investment in Weiche In May 2018, the Company invested in Weiche, a professional information technology company focusing on technology development and technologyconsulting service. The Company acquired 40% ordinary equity interest with a total consideration of RMB 3 million. The Company exercises significantinfluence in Weiche and therefore accounts for this as a long-term investment using equity method. Investments accounted for using cost method The Group does not have significant influence over these equity investments which do not have readily determinable market value, and therefore accountedfor these investments using cost method. Investment in ClearVue Pony The Company’s wholly-owned subsidiary Xin Limited entered into an agreement with ClearVue Partner II, L.P to establish ClearVue Pony to invest in PonyAI, a technology company focusing on automobiles pilotless system. After the transaction, the Company held 23.8% ownership with a consideration ofUS$10 million. Since the Company did not appoint Board member in ClearVue Pony and could not exercise significant influence, this investment accountedfor as long-term investment using cost method. F-46Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 14. OTHER NON-CURRENT ASSETS As of December 31, 2017 December 31, 2018 RMB RMB Prepayment of long-term investment112,902— In September 2017, the Company prepaid investment consideration of RMB112.9 million in Jincheng, a professional consumer financial services provider.The investment was closed in October 2018 and prepayment of long-term investment was transferred to long-term investment (Note 13). 15. SHORT-TERM AND LONG-TERM BORROWINGS The following table presents short-term and long-term borrowings from commercial banks or other institutions as of December 31, 2017 and 2018. Short-termborrowings includes borrowings with maturity terms shorter than one year and the current portion of the long-term borrowings. Funding PartnersFixed annualinterest rate Term As ofDecember 31,2017 As ofDecember 31,2018 RMB RMB Short-term borrowings4.8%-12.0%within 12 months320,877325,715Current portion of long-term borrowings5.2%-9.6%mature in 2019105,906298,873Long-term borrowings5.0%-6.4%2 - 4 years374,104481,801800,8871,106,389 Long-term borrowings of RMB120.8 million and current portion of long-term borrowings of RMB278.6 million were secured by loan recognized as a resultof payment under the guarantee of RMB343.2 million as at December 31, 2018 (Note 6). Short-term borrowings of RMB 20.0 million were secured by advance to sellers of RMB 21.3 million (Note 7). Short-term borrowings of RMB 20.4 millionwere secured by financial lease receivable — consumers of RMB 32.5 million (Note 10). The weighted average interest rate for the outstanding borrowings was approximately 6.4% and 6.5% as of December 31, 2017 and 2018, respectively. F-47Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 16. GUARANTEE LIABILITIES The movement of guarantee liabilities is as follows: Year endedDecember 31,2016 Year endedDecember 31,2017 Year endedDecember 31,2018RMB RMB RMB Balance at the beginning of the year49376,325173,907Fair value of guarantee liabilities upon the inception of new guarantees84,708284,452403,370Guarantee settled(6,893)(184,586)(257,953)(Gains)/losses from guarantee liabilities(1,983)(2,284)1,931Balance at the end of the year76,325173,907321,255 The terms of the guarantee range from 2 years to 4 years, as of December 31, 2016, 2017 and 2018. 17. DEPOSIT OF INTERESTS FROM CONSUMERS AND PAYABLE TO FINANCING PARTNERS As of December 31, 2017 December 31, 2018 RMB RMB Deposit of interests from consumers and payable to financing partners1,076,096512,569Less: current portion(732,273)(482,827)Non-current portion343,82329,742 The Group facilitates loans extended by third-party financing partners to consumers through online platform. The third-party financing partners provide allthe funds for the consumer loans, while the Group provides services to facilitate such financing transactions, including collection of interests deposit from theconsumers at inception. The interest deposit normally approximates all the interest throughout the life of the loan. The balance represents the interestsdeposit from the consumers and subsequently payable to the financing partners. Since the second quarter of 2018, the Group have ceased the practice ofcollecting interest on behalf of the financing partners, and the down payments made by the consumers no longer include deposits of interest. 18. ADVANCE FROM BUYERS COLLECTED ON BEHALF OF SELLERS As of December 31, 2017 December 31, 2018 RMB RMB Advance from buyers collected on behalf of sellers226,891375,803 When facilitating used car transaction, the Group connects sellers and buyers and provides service in relation to the cash flow remittance, i.e. the Groupcollects the cash from buyers and remits to sellers. The balance represents the advance payments collected from buyers, which are subsequently paid to sellersin a short period of time. F-48Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 19. OTHER PAYABLES AND ACCRUALS As of December 31, 2017 December 31, 2018 RMB RMB Accrued advertising expenses429,658407,557Deposits (i)196,089207,076Accrued professional services and other expenses40,932129,203Accrued salaries and benefits143,777185,597Tax payables50,637102,324Interest payable4,61061,434Advance from customer12,5519,704Others49,13594,405927,3891,197,300 (i) In order to participate the auction through the platforms, the participants are required to pay deposits to the Group. The deposits were interest free andhave no fixed terms of repayment. 20. OTHER CURRENT LIABILITIES As ofDecember 31, 2017 December 31, 2018RMB RMB Prepayment from Apex Ease Limited130,684—Prepayment from Huangpu Investment Holding Limited32,671—163,355— Apex Ease Limited, a Series G-Plus preferred shareholder incorporated in British Virgin Islands, subscribed the Company’s preferred share capital of US$20million in December 2017. The Group received a prepayment of US$20 million (equivalent to RMB130.7 million) in December 2017 from Apex EaseLimited as prepayment for this investment. The investment subsequently closed in January 2018 according to the Series G-Plus share subscription agreement. Huangpu Investment Holding Limited, a Series G-Plus preferred shareholder incorporated in British Virgin Islands, subscribed the Company’s preferred sharecapital of US$5 million in December 2017. The Group received a prepayment of US$5 million (equivalent to RMB 32.7 million) in December 2017 fromHuangpu Investment Holding Limited as prepayment for this investment. The investment had been closed in January 2018 according to the Series G-Plusshare subscription agreement. F-49Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 21. CONVERTIBLE NOTES As ofDecember 31, 2017 December 31, 2018RMB RMB Convertible notes—1,188,192 On June 9, 2018, the Company entered into a Convertible Note Purchase Agreement with CNCB (Hong Kong) Investment Limited (the “CNCB (HongKong)”), a company incorporated under the laws of Hong Kong. CNCB (Hong Kong) agreed to purchase convertible notes from the Company in the totalprincipal amount of US$100 million (equivalent to RMB 686.3 million) bearing interest rate of 6% per annum. On June 12, 2018, the Company entered intothe other Convertible Note Purchase Agreement with Golden Fortune Company Limited (the “Golden Fortune”), a company incorporated under the laws ofthe Cayman Islands and whose investment manager is ICBC Asset Management (Global) Company Limited. Golden Fortune agreed to purchase convertiblenotes from the Company in the total principal amount of US$75 million (equivalent to RMB 514.7 million) bearing interest rate of 6.5% per annum. Both ofconvertible notes (the “Notes”) would mature in 363 days since the offering date. CNCB (Hong Kong) and Golden Fortune may elect to convert theirrespective Notes into Class A ordinary shares from the 181st day after June 27, 2018 with conversion price per ordinary shares equal to 109.5% and 108% ofIPO price per ordinary share, respectively. The Company has accounted for each of the Notes as a single instrument. The value of the Notes is measured by the cash received. The Company recordedthe interest expenses according to its annual interest rate. There was no BCF attribute to the Notes as the set conversion price for each of the Notes was greaterthan the fair value of the ordinary share at the date of the issuance. The Company is currently going through refinancing process of the Notes. 22. RELATED PARTY BALANCES AND TRANSACTIONS The table below sets forth the major related parties and their relationships with the Group as of December 31, 2018: Name of related parties Relationship with the Group Xin Gao GroupOrdinary shareholder and Preferred Shareholder of the Company, controlledby Mr. Kun Dai, Founder and CEO of the Group before June 27, 2018 andClass B ordinary shareholder of the Company after June 27, 2018Gao Li GroupPreferred Shareholder of the Company, controlled by Mr. Kun Dai, Founderand CEO of the Group before June 27, 2018 and Class A ordinaryshareholder of the Company after June 27, 2018Baidu (Hong Kong) Limited (“Baidu”)Preferred Shareholder of the Company before June 27, 2018 and Class Aordinary shareholder of the Company after June 27, 2018BaoguAn associate of the Group before August 31, 2017Shanghai Xiao Qing Information Technology Co., Ltd. (“Xiao Qing”)An associate of the GroupChefangAn associate of the Group before May 31, 2017Mr. Kun DaiFounder and CEO of the Group F-50Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 22. RELATED PARTY BALANCES AND TRANSACTIONS(CONTINUED) Details of related party balances as of December 31, 2017 and 2018 and transactions for the year ended December 31, 2016, 2017 and 2018 are as follows: Amounts due from related parties As ofDecember 31, 2017 December 31, 2018RMB RMB Loan receivablesGao Li Group379,073—Xin Gao Group134,011—Mr. Kun Dai94,630—Prepaid expensesBaidu577—608,291— Transactions with related parties Year endedDecember 31, 2016 Year endedDecember 31, 2017 Year endedDecember 31, 2018RMB RMB RMB Service provided by the related partiesXiao Qing3,4971,503—Baogu7,31210,747—Baidu16,3557801,39127,16413,0301,391 F-51Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 23. INCOME TAX EXPENSE Cayman Islands Under the current laws of the Cayman Islands, the Company and its subsidiaries incorporated in the Cayman Islands are not subject to tax on income orcapital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders. British Virgin Islands Under the current laws of the British Virgin Islands, entities incorporated in the British Virgin Islands are not subject to tax on their income or capital gains. Hong Kong Under the current Hong Kong Inland Revenue Ordinance, the Group’s subsidiaries in Hong Kong are subject to 16.5% Hong Kong profit tax on its taxableincome generated from operations in Hong Kong. Additionally, payments of dividends by the subsidiaries incorporated in Hong Kong to the Company arenot subject to any Hong Kong withholding tax. China On March 16, 2007, the National People’s Congress of PRC enacted a new Corporate Income Tax Law (“new CIT law”), under which Foreign InvestmentEnterprises (“FIEs”) and domestic companies would be subject to corporate income tax at a uniform rate of 25%. The new CIT law became effective onJanuary 1, 2008. Under the new CIT law, preferential tax treatments will continue to be granted to entities which conduct businesses in certain encouragedsectors and to entities otherwise classified as “High and New Technology Enterprises” or “Software Enterprises”. Youxinpai (Beijing) Information Technology Co., Ltd. has been qualified as “high and new technology enterprise” and enjoys a preferential income tax rateof 15% from 2016 to 2018. Youxin Internet (Beijing) Information Technology Co., Ltd. has been qualified as “Software Enterprises” and enjoys thepreferential period for preferential tax treatments shall be calculated from the profit-making year, and the enterprise was exempted from CIT in 2016 and2017, and will be allowed a 50% tax reduction at a statutory rate of 25% in 2018, 2019 and 2020. The applicable tax rate for Youxinpai (Beijing)Information Technology Co., Ltd was 12.5% (2017: 12.5%). The applicable tax rate for Youxin Internet (Beijing) Information Technology Co., Ltd was12.5% (2017: nil). Tax holiday had no impact as there is no taxable profit for both Youxinpai (Beijing) Information Technology Co., Ltd. and Youxin Internet (Beijing)Information Technology Co., Ltd. for the year ended December 31, 2017 and 2018. The Group’s other PRC subsidiaries, VIEs and VIEs’ subsidiaries are subject to the statutory income tax rate of 25%. Withholding tax on undistributed dividends The new CIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “actual management body” is locatedin the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its globalincome. The Implementing Rules of the EIT Law merely define the location of the “actual management body” as “the place where the exercising, insubstance, of the overall management and control of the production and business operation, personnel, accounting, property, etc., of a non-PRC company islocated.” Based on a review of surrounding facts and circumstances, the Group does not believe that it is likely that its operations outside of the PRC shouldbe considered a resident enterprise for PRC tax purposes. F-52Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 23. INCOME TAX EXPENSE (CONTINUED) Withholding tax on undistributed dividends (continued) The new CIT law also imposes a withholding income tax of 10% on dividends distributed by an FIE to its immediate holding company outside of China, ifsuch immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividendshave no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’sjurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. According to the arrangement betweenMainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006,dividends paid by an FIE in China to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if theforeign investor owns directly at least 25% of the shares of the FIE). The Company did not record any dividend withholding tax, as it has no retained earningsfor any of the periods presented. Composition of income tax expense The current and deferred portions of income tax expense included in the Consolidated Statements of Comprehensive Loss during the year endedDecember 31, 2016, 2017 and 2018 are as follows: Year EndedDecember 31, 2016 Year EndedDecember 31, 2017 Year EndedDecember 31, 2018RMB RMB RMB Current income tax expense(2,425)(1,190)(15,692)Deferred income tax credit6206201,107(1,805)(570)(14,585) Reconciliation of the differences between statutory tax rate and the effective tax rate Reconciliation of the differences between the statutory EIT rate applicable to losses of the consolidated entities and the income tax expenses of theCompany: Year EndedDecember 31, 2016 Year EndedDecember 31, 2017 Year EndedDecember 31, 2018RMB RMB RMB Loss before tax(1,381,484)(2,750,825)(1,526,331)Income tax computed at PRC statutory tax rate(345,371)(687,706)(381,583)Effect of different tax rate18,4026,709(21,369)Non-deductible expense131,549241,11493,925Change of valuation allowance193,615439,313294,442(1,805)(570)(14,585) F-53Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 23. INCOME TAX EXPENSE (CONTINUED) Deferred tax assets and deferred tax liabilities The following table sets forth the significant components of the deferred tax assets: As ofDecember 31,2016 December 31,2017 December 31,2018RMB RMB RMB Deferred tax assetsNet accumulated losses-carry forward345,276507,849636,440Deductible advertising expense149,131348,032540,627Accruals17,49693,73268,271Allowance6,5958,1986,915Less: valuation allowance(518,498)(957,811)(1,252,253)Net deferred tax assets——— As ofDecember 31,2017 December 31,2017 December 31,2018RMB RMB RMB Deferred tax liabilitiesIntangible assets arisen from business combinations2,2731,6534,759 Movement of valuation allowance Year EndedDecember 31,2016 Year EndedDecember 31,2017 Year EndedDecember 31,2018RMB RMB RMB Balance at beginning of the year(324,883)(518,498)(957,811)Changes of valuation allowance(193,615)(439,313)(294,442)Balance at end of the year(518,498)(957,811)(1,252,253) As of December 31, 2018, the Group had net operating loss carries forwards of approximately RMB2,545.8 million which arose from the subsidiaries, VIEsand VIEs’ subsidiaries established in the PRC. For Youxinpai (Beijing) Information Technology Co., Ltd which has been qualified as “high and technologyenterprise”, its loss carries forwards will expire from 2019 to 2028 according to newly issued Caishui 2018[78]. For all other remaining subsidiaries in China,the loss carries forwards will expire from 2019 to 2023. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that amount of the deferred tax assetswill not be realized. In making such determination, the Group evaluates a variety of factors including the Group’s operating history, accumulated deficit, theexistence of taxable temporary differences and reversal periods. The Group has incurred net accumulated operating losses for income tax purposes since its inception. The Group believes that it is more likely than not thatthese net accumulated operating losses and other deferred tax assets will not be utilized in the future. Therefore, the Group has provided full valuationallowances for the deferred tax assets as of December 31, 2016, 2017 and 2018. F-54Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 24. ORDINARY SHARES As of December 31, 2017 and 2018, 1,312,839,230 and 10,000,000,000 ordinary shares had been authorized respectively. A total of 880,659,899 ordinaryshares, par value US$0.0001 per share, consists of 839,850,038 Class A ordinary shares and 40,809,861 Class B ordinary shares, had been issued andoutstanding as of December 31, 2018. 49,318,860 shares issued and outstanding as of December 31, 2017. 40,809,861 ordinary shares were redesignated toClass B ordinary shares with super voting power (one share with ten votes) granted to Mr. Kun Dai, Founder and CEO of the Group, upon the completion ofthe IPO. The Company issued and granted 17,742,890 restricted shares to Mr. Kun Dai on May 14, 2018. The restricted shares were vested immediately uponconsummation of the IPO. On May 25, 2018, one of the Company’s executive officers exercised his vested stock options to acquire 3,333,330 ordinary sharesof the Company. In addition, the Company also offered vesting acceleration to that executive officer’s 1,666,670 unvested stock options on May 25, 2018and the executive officer also exercised such stock options to acquire 1,666,670 ordinary shares of the Company. Besides of which, certain option holdersexercised their stock options and acquired 3,479,505 ordinary shares. Immediately prior to the completion of the IPO, all classes of preferred shares of the Company were converted and redesignated as 743,343,820 Class Aordinary shares on a one-for-one basis, all ordinary shares of the Company were redesignated as Class B ordinary share. Mr. Kun Dai, founder, chairman andchief executive officer of the Company, will be deemed to beneficially own all of our issued Class B ordinary shares On June 27, 2018, the Company completed its IPO on NASDAQ Global Select Market. The Company offered 75,000,000 Class A ordinary shares whichrepresented 25,000,000 ADS. Pursuant to an agreement entered into by the Company with Mr. Kun Dai and Xin Gao Group on May 28, 2018, Mr. Kun Dai and Xin Gao Group agreed tosurrender and deliver 37,990,839 shares held by Xin Gao Group to the Company, and the Company agreed to accept these surrendered shares to settle all theoutstanding principal and interest accrued of the loan due from Xin Gao Group, Mr. Kun Dai and Gao Li Group. Fairlubo Share Swap represents the issuance of 13,026,713 Class A ordinary shares upon the conversion of Fairlubo shares held by certain Fairluboshareholders upon completion of this offering, at an initial public offering price of US$9.00 per ADS. 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES On July 17, 2012, the Company entered into a shares purchase agreement with certain investors, pursuant to which 50,000,000 Series A ConvertibleRedeemable Preferred Shares (“Series A Preferred Shares”) were issued on July 17, 2012 for an aggregated consideration of US$10.0 million. The Companyincurred issuance costs of RMB0.4 million (US$0.1 million) in connection with this offering. On March 26, 2013, the Company entered into a shares purchase agreement with certain investors, pursuant to which 52,951,970 Series B ConvertibleRedeemable Preferred Shares (“Series B Preferred Shares”, “Series B Preferred Shares Tranche I”, or “Series B-I”) were issued on March 26, 2013 for anaggregated consideration of US$15.0 million. The Company incurred issuance costs of RMB0.34 million (US$0.1 million) in connection with this offering. On April 22, 2013, the Company entered into a shares purchase agreement with certain investors, pursuant to which 17,650,660 Series B ConvertibleRedeemable Preferred Shares (“Series B Preferred Shares”, “Series B Preferred Shares Tranche II”, or “Series B-II”) were issued on April 22, 2013 for anaggregated consideration of US$5.0 million. The Company incurred issuance costs of RMB0.1 million (US$0.02 million) in connection with this offering. In December 2013, the Company issued certain Convertible Promissory Notes (“2013 Notes”) amounting to US$5.0 million to the third party investor LCFund V, L.P. and LC Parallel Fund V, L.P., which were subsequently converted into Series C-2 Convertible Redeemable (“Series C Preferred Shares,” or“Series C-2 Preferred Shares”), upon the issuance of the Series C-2 Preferred Shares on March 24, 2014. F-55Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES(CONTINUED) On February 26, 2014, the Company issued certain Convertible Promissory Notes (“2014 Notes”) amounting to US$5.0 million to the third party investorDCM Hybrid RMB Fund, L.P., which were subsequently converted into Series C-1 Convertible Redeemable Preferred Shares (“Series C Preferred Shares”, or“Series C-1 Preferred Shares”, or “Series C-1 Preferred Shares Tranche I”, or “Series C-1-I”), upon the issuance of the Series C-1 Preferred Shares on March 24,2014. The Company incurred issuance costs of RMB0.3 million (US$0.1 million) in connection with this offering. On March 24, 2014, the Company entered into a shares purchase agreement with certain investors, pursuant to which 85,527,210 Series C-1 ConvertibleRedeemable Preferred Shares Tranche I and 10,558,910 Series C-2 Preferred Shares were issued on March 24, 2014 for an aggregated consideration ofUS$50.0 million (including the conversion of 2013 Notes and 2014 Notes), of which 7,243,410 Series C-1 Convertible Redeemable Preferred Shares TrancheI was subsequently repurchased by the Company in November 2014. The Company incurred issuance costs of RMB0.07 million (US$0.01 million) inconnection with this offering. On August 7, 2014, the Company entered into a shares purchase agreement with certain investors, pursuant to which 19,006,050 Series C-1 ConvertibleRedeemable Preferred Shares (“Series C Preferred Shares”, or “Series C-1 Preferred Shares”, or “Series C-1 Preferred Shares Tranche II”, or “Series C-1-II”) wereissued on August 7, 2014 for an aggregated consideration of US$10.0 million, of which 3,621,710 and 6,959,370 Series C-1 Convertible RedeemablePreferred Shares was repurchased by the Company in November 2014 and May 2015, respectively. The Company incurred issuance costs of RMB0.4 million(US$0.1 million) in connection with this offering. On September 9, 2014, the Company entered into a shares purchase agreement with certain investors, pursuant to which 144,868,320 Series D ConvertibleRedeemable Preferred Shares (“Series D Preferred Shares”, “Series D Preferred Shares Tranche I”, or “Series D-I”) were issued on September 9, 2014 for anaggregated consideration of US$200.0 million. The Company incurred issuance costs of RMB0.8 million (US$0.1 million) in connection with this offering. On November 28, 2014, the Company entered into a shares purchase agreement with certain investors, pursuant to which 14,486,830 Series D ConvertibleRedeemable Preferred Shares (“Series D Preferred Shares”, “Series D Preferred Shares Tranche II”, or “Series D-II”) were issued on November 28, 2014 for anaggregated consideration of US$20.0 million. The Company incurred issuance costs of RMB0.08 million (US$0.01 million) in connection with this offering. On March 13, 2015, the Company entered into a shares purchase agreement with certain investors, pursuant to which 89,477,490 Series E ConvertibleRedeemable Preferred Shares (“Series E Preferred Shares”) were issued on March 13, 2015 for an aggregated consideration of US$150.0 million. TheCompany incurred issuance costs of RMB0.8 million (US$0.1 million) in connection with this offering. On November 13, 2015, the Company entered into a shares purchase agreement with certain investors, pursuant to which 73,053,830 Series F ConvertibleRedeemable Preferred Shares (“Series F Preferred Shares”, or “Series F Preferred Shares Tranche I”, or “Series F-I”) were issued on November 13, 2015 for anaggregated consideration of US$181.0 million. The Company incurred issuance costs of RMB0.8 million (US$0.1 million) in connection with this offering. On December 1, 2015, the Company entered into a shares purchase agreement with certain investors, pursuant to which 12,108,370 Series F ConvertibleRedeemable Preferred Shares (“Series F Preferred Shares, “Series F Preferred Shares Tranche II”, or “Series F-II”) were issued on December 1, 2015 for anaggregated consideration of US$30.0 million. The Company incurred issuance costs of RMB0.1 million (US$0.02 million) in connection with this offering. F-56 Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) On April 20, 2016, the Company entered into a shares purchase agreement with certain investors, pursuant to which 4,910,890 Series A-1 ConvertibleRedeemable Preferred Shares (“Series A-1 Preferred Shares”) were issued on April 20, 2016 for an aggregated consideration of US$10.0 million. TheCompany incurred issuance costs of RMB0.8 million (US$0.1 million) in connection with the offering of Series A-1 Preferred Shares. The subscriptionconsideration is higher than the fair value of the preferred shares as of the date of closing, with the difference of RMB3.4 million being recorded asshareholder’s contribution from Series A-1 preferred shareholders. On December 26, 27, 28 and 30, 2016, the Company entered into a shares purchase agreement with certain investors, pursuant to which 70,725,860 Series GConvertible Redeemable Preferred Shares (“Series G Preferred Shares”, “Series G Preferred Shares Tranche I”, or “Series G-I”) were issued on January 13, 2017for an aggregated consideration of US$212.2 million. The Company incurred issuance costs of RMB5.0 million (US$0.8 million) in connection with theoffering of Series G-I Preferred Shares. The subscription consideration is lower than the fair value of this preferred shares as of the date of closing, with thedifference of RMB6.9 million being recorded as deemed dividend to Series G-I preferred shareholders. On July 20 and 30, 2017, the Company entered into a shares purchase agreement with certain investors, pursuant to which 28,117,410 Series G ConvertibleRedeemable Preferred Shares (“Series G Preferred Shares”, “Series G Preferred Shares Tranche II”, or “Series G-II”) were issued on July 28, 2017 for anaggregated consideration of US$82.5 million. The Company incurred issuance costs of RMB0.9 million (US$0.1 million) in connection with the offering ofSeries G-II Preferred Shares. The subscription consideration is lower than the fair value of this preferred shares as of the date of closing, with the difference ofRMB233.1 million being recorded as deemed dividend to Series G-II preferred shareholders. On August 31, 2017, the Company entered into a shares purchase agreement with certain investors, pursuant to which 16,777,370 Series G ConvertibleRedeemable Preferred Shares (“Series G Preferred Shares”, “Series G Preferred Shares Tranche III”, or “Series G-III”) were issued on October 21, 2017 for anaggregated consideration of US$50.0 million. The Company incurred issuance costs of RMB0.3 million (US$0.05 million) in connection with the offering ofSeries G-III Preferred Shares. The subscription consideration is lower than the fair value of this preferred shares as of the date of closing, with the difference ofRMB185.0 million being accounted as deemed dividend to Series G-III preferred shareholders. On November 23, 2017, the Company entered into a shares purchase agreement with certain investors, pursuant to which 14,764,090 Series G ConvertibleRedeemable Preferred Shares (“Series G Preferred Shares”, “Series G Preferred Shares Tranche IV”, or “Series G-IV”) were issued on November 27, 2017 for anaggregated consideration of US$44.0 million. The Company incurred issuance costs of RMB0.3 million (US$0.04 million) in connection with the offering ofSeries G-IV Preferred Shares. The subscription consideration is lower than the fair value of this preferred shares as of the date of closing, with the difference ofRMB162.6 million being accounted as deemed dividend to Series G-IV preferred shareholders. On November 23 and December 6, 2017, the Company entered into a shares purchase agreement with certain investors, pursuant to which 67,922,000Series G-Plus Convertible Redeemable Preferred Shares (“Series G-Plus Preferred Shares”, “Series G Preferred Shares Tranche Plus”, or “Series G-Plus”) wereissued on January 2, 2018 for an aggregated consideration of US$250.0 million. The Company incurred issuance costs of RMB3.9 million (US$0.6 million)in connection with the offering of Series G-Plus Preferred Shares. The subscription consideration is lower than the fair value of this preferred shares as of thedate of closing, with the difference of RMB544.8 million being accounted as deemed dividend to Series G-Plus preferred shareholders. The Series A, A-1. B, C, D, E, F, G and G-Plus Preferred Shares are collectively referred to as the Preferred Shares. F-57Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) On June 1 2018, the Company effected its board of directors and shareholders’ resolution on share split plan. As such, each of ordinary share and PreferredShares of the Company was subdivided into 10 shares at par value of US$0.0001. respectively. All of Preferred Shares were converted into Class A ordinary shares immediately upon the completion of the Company’s initial public offerings on June 27,2018. Prior to their conversion, Preferred Shares were entitled to certain preference with respect to conversion, redemption, dividends and liquidation. Accounting for preferred shares The Company classified the Preferred Shares in the mezzanine section of the Consolidated Balance Sheets because they were redeemable at the holders’option any time after a certain date and were contingently redeemable upon the occurrence of certain liquidation event outside of the Company’s control.The conversion feature and liquidation preferences feature as mentioned below, are initially measured at its fair value, respectively, and the initial carryingvalue for the Preferred Shares are allocated on a residual basis, net of issuance costs. Modification of preferred shares The Company assesses whether an amendment to the terms of its convertible redeemable preferred shares is an extinguishment or a modification based on aqualitative evaluation of the amendment. If the amendment adds, removes, significantly changes to a substantive contractual term or to the nature of theoverall instrument, the amendment results in an extinguishment of the preferred shares. The Company also assess if the change in terms results in valuetransfer between Preferred Shareholders or between Preferred Shareholders and ordinary shareholders. When convertible redeemable preferred shares are extinguished, the difference between the fair value of the consideration transferred to the convertibleredeemable Preferred Shareholders and the carrying amount of such preferred shares (net of issuance costs) is treated as a deemed dividend to the PreferredShareholders. When convertible redeemable preferred shares are modified and such modification results in value transfer between Preferred Shareholders andordinary shareholders, the change in fair value resulted from the amendment is treated as a deemed dividend to or from the Preferred Shareholders. On January 13, 2017, the Redemption Start Date of Series A, A-1, B, C D, E and F preferred shares was extended from November 13, 2020 to January 13,2022, which was to be in line with the optional redemption date of Series G Tranche I Preferred Shares. In the meantime, the market capitalization criteria fora “Qualified IPO” was increased from US$2.5 billion to US$3 billion. On July 28, 2017, the Redemption Start Date of Series A, A-1, B, C, D, E, F and G-1preferred shares was extended from January 13, 2022 to July 28, 2022, which is to be in line with the optional redemption date of Series G Tranche IIPreferred Shares. On October 21, 2017, the Redemption Start Date of Series A, A-1, B, C, D, E, F, G-1 and G-2 preferred shares was modified from July 28,2022 back to January 13, 2022. In the meantime, the market capitalization criteria for a “Qualified IPO” was increased from US$3.173 billion to US$3.2billion. The Company evaluated the modifications and concluded that they represented modifications, rather than extinguishment, of Preferred Shares, whichresulted in a transfer of value from preferred shareholders to ordinary shareholder. On the date of the modifications, the Company assessed the total fair valueof Preferred Shares immediately before and after the change of the terms with the assistance from an independent third-party appraiser. The Company isultimately responsible for the determination of such fair value. The combined change in fair value of Preferred Shares immediately before and after themodification was US$5.9 million on January 13, 2017, US$2.7 million on July 28, 2017 and US$5.1 million on October 21, 2017. This increase in fair valueof the ordinary shares of US$5.9 million on January 13, 2017, US$2.7 million on July 28, 2017 and US$5.1 million on October 21, 2017 respectively is, insubstance, a transfer of wealth mostly from the Preferred Shareholders to the ordinary shareholder, and therefore are recorded as deemed dividend from thePreferred Shareholders. F-58Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) As of December 31, 2017 and 2018, the fair values of the conversion features which required to be bifurcated and accounted for as derivative liabilities are asfollows: As ofDecember 31, 2017 December 31, 2018RMB RMB Derivative liability — conversion feature1,427,560— F-59 Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 25. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) The Company’s convertible redeemable Preferred Shares activities for the years ended December 31, 2016, 2017 and 2018 are summarized below: Series A Shares Series A-1 Shares Series B Shares Series C Shares Series D Shares Series E Shares Series F Shares Series G SharesSeries G-Plus SharesNumber ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB) Number ofshares Amount(RMB)Number ofshares Amount(RMB) Balance as ofJanuary 1,201650,000,00081,385,584——70,602,630155,112,56097,267,680342,087,590159,355,1501,414,071,46089,477,490960,738,37385,162,2001,303,374,879———— Issuance ofSeries A-1Shares, net ofissuance cost——4,910,89057,941,529——————————————Accretion onconvertibleredeemablepreferredshares toredemptionvalue—6,480,973—4,652,709—12,483,871—33,082,269—144,135,637—91,828,728—128,681,319———— Balance as ofDecember 31,201650,000,00087,866,5574,910,89062,594,23870,602,630167,596,43197,267,680375,169,859159,355,1501,558,207,09789,477,4901,052,567,10185,162,2001,432,056,198———— Issuance ofSeries GShares, net ofissuance cost——————————————130,384,7303,089,182,344——Accretion onconvertibleredeemablepreferredshares toredemptionvalue—6,544,652—6,599,134—12,697,414—33,389,066—145,460,002—93,783,794—131,600,542—125,749,958—— Balance as ofDecember 31,201750,000,00094,411,2094,910,89069,193,37270,602,630180,293,84597,267,680408,558,925159,355,1501,703,667,09989,477,4901,146,350,89585,162,2001,563,656,740130,384,7303,214,932,302—— Issuance ofSeries G-PlusShares, net ofissuance cost————————————————67,922,0002,066,336,179Accretion onconvertibleredeemablepreferredshares toredemptionvalue—3,232,164—3,336,630—6,271,618—16,640,809—72,704,263—46,708,885—65,810,530—68,361,184—35,885,258Repurchase of thesurrendershares(3,313,980)(6,471,764)————(8,424,970)(36,829,243)——————————Convert toordinaryshares uponIPO(46,686,020)(91,171,609)(4,910,890)(72,530,002)(70,602,630)(186,565,463)(88,842,710)(388,370,491)(159,355,150)(1,776,371,362)(89,477,490)(1,193,059,780)(85,162,200)(1,629,467,270)(130,384,730)(3,283,293,486)(67,922,000)(2,102,221,437) Balance as ofDecember 31,2018—————————————————— F-60Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION On March 26, 2013, the Company adopted the 2013 Stock Incentive Plan (“2013 Plan”). Under the 2013 Plan, the Company’s Board of Directors has approved that a maximum aggregate number of shares that may be issued pursuant to all awardsgranted under the 2013 Plan shall be 34,275,990 shares. On November 13, 2015, the Company increased the maximum number of shares available for grantsof awards to 40,942,650. On April 20, 2016, the Company increased the maximum number of shares available to 65,000,000. On February 14, 2018, the Company adopted the 2018 Amended and Restated Share Incentive Plan (“2018 Plan”). Under the 2018 Plan, the Companyincreased the maximum number of shares available to 87,742,890. On November 19, 2018, the Company amended and restated the 2018 Plan, and renamed it 2018 Second Amended and Restated Incentive Plan (“2018Second Plan”). Under the 2018 Second Plan, the Company increased the maximum number of shares available to 102,040,053. Stock options granted to an employee under the 2013 Plan will generally be exercisable upon the Company completes a Qualified IPO or a defined CorporateTransaction (i.e. change of control, etc.) and the employee renders service to the Company in accordance with a stipulated service schedule. Employees aregenerally subject to a four-year service schedule, under which an employee earns an entitlement to vest in 25% of his option grants at the end of each year ofcompleted service. For the Company’s key management grantee, the vested stock options granted could be retained and be exercised until the earlier of (i) any day commencingfrom the day that is six (6) months prior to the anticipated consummation of an IPO, or (ii) the day immediately prior to the consummation of a CorporateTransaction before March 26, 2023. For the Company’s employee grantee, prior to the Company completes a Qualified IPO or Corporate Transaction, thestock options granted to the employee shall be forfeited three months after termination of employment of the employee. The Company’s key management,management and employee grantees are collectively hereafter referred to as “Grantees”. The Company granted 11,618,090, 12,819,330 and 25,224,000 stock options to Grantees for the years ended December 31, 2016, 2017 and 2018,respectively. F-61Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION (CONTINUED) The following table sets forth the stock options activity for the years ended December 31, 2016, 2017 and 2018: Number ofshares Weighted-averageexercise price Weighted averageremainingcontractual termAggregateintrinsicvalueWeightedaverage fairvalue ofoptions US$ 000’US$US$ Outstanding as of January 1, 201620,755,3900.138.2629,341.640.57 Granted11,618,0901.01——1.31Forfeited(800,520)0.40——0.55 Outstanding as of December 31, 201631,572,9600.458.0257,467.590.85 Granted12,819,3302.13——1.72Forfeited(3,146,130)1.31——1.06 Outstanding as of December 31, 201741,246,1600.907.53147,427.661.10 Granted25,224,0002.90——3.32Forfeited(2,822,511)2.39——2.32Exercised(8,452,649)0.20——1.23 Outstanding as of December 31, 201855,195,0001.857.7427,773.182.03 F-62Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION (CONTINUED) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the estimated fair value of theunderlying stock at each reporting date. In determining the grant date fair value of our ordinary shares for purposes of recording share-based compensation in connection with employee stockoptions, we, with the assistance of independent appraisers, performed retrospective valuations instead of contemporaneous valuations because, at the time ofthe valuation dates, our financial and limited human resources were principally focused on business development efforts. This approach is consistent with theguidance prescribed by the AICPA Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, orthe Practice Aid. Specifically, the ‘‘Level B’’ recommendation in paragraph 16 of the Practice Aid sets forth the preferred types of valuation that should beused. We, with the assistance of an independent valuation firm, evaluated the use of three generally accepted valuation approaches: market, cost and incomeapproaches to estimate our enterprise value. We and our appraisers considered the market and cost approaches as inappropriate for valuing our ordinaryshares because no exactly comparable market transaction could be found for the market valuation approach and the cost approach does not directlyincorporate information about the economic benefits contributed by our business operations. Consequently, we and our appraisers relied solely on theincome approach in determining the fair value of our ordinary shares. This method eliminates the discrepancy in the time value of money by using a discountrate to reflect all business risks including intrinsic and extrinsic uncertainties in relation to our company. The income approach involves applying discounted cash flow analysis based on our projected cash flow using management’s best estimate as of thevaluation dates. Estimating future cash flow requires us to analyze projected revenue growth, gross margins, operating expense levels, effective tax rates,capital expenditures, working capital requirements, and discount rates. Our projected revenues were based on expected annual growth rates derived from acombination of our historical experience and the general trend in this industry. The revenue and cost assumptions we used are consistent with our long-termbusiness plan and market conditions in this industry. We also have to make complex and subjective judgments regarding our unique business risks, ourlimited operating history, and future prospects at the time of grant. Other assumptions we used in deriving the fair value of our equity include: · no material changes will occur in the applicable future periods in the existing political, legal, fiscal or economic conditions in China; · no material changes will occur in the current taxation law in China and the applicable tax rates will remain consistent; · we have the ability to retain competent management and key personnel to support our ongoing operations; and · industry trends and market conditions for the used car e-commerce businesses will not deviate significantly from current forecasts. F-63Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION (CONTINUED) Options granted to Grantees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following assumptions: Year endedDecember 31, 2016Year endedDecember 31, 2017Year endedDecember 31, 2018 Expected volatility45%-53%43%-51%42%-47%Risk-free interest rate (per annum)2.08%-2.40%2.08%-2.32%2.49%~2.69%Exercise multiple2.8/2.22.8/2.22.8/2.2Expected dividend yield0%0%0%Contractual term (in years)101010 The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected termof the Company’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a termconsistent with the expected term of the Company’s options in effect at the option valuation date. The exercise multiple is estimated as the ratio of fair valueof underlying shares over the exercise price as at the time the option is exercised, based on a consideration of empirical studies on the actual exercisebehavior of employees. The expected dividend yield is zero as the Company has never declared or paid any cash dividends on its shares, and the Companydoes not anticipate any dividend payments in the foreseeable future. The expected term is the contract life of the option. For the Company’s stock options granted to Grantees, the completion of an IPO or the Corporate Transaction is considered to be a performance condition ofthe awards. An IPO or the Corporate Transaction, is not considered to be probable until it is completed. Under ASC 718, compensation cost should be accruedif it is probable that the performance condition will be achieved. As a result, no compensation expense will be recognized related to these options until thecompletion of an IPO or the Corporate Transaction, and hence no share-based compensation expense was recognized for the year ended December 31, 2016.In case when it is considered probable that a Qualified IPO will be completed, the compensation cost should be recognized earlier for the key managementgrantees, at six (6) months prior to the anticipated consummation of the IPO, based on this special term offered to the key management grantees. All theoptions granted to key management are fully vested as at December 31, 2017, and a share-based compensation expense of US$ 4.2 million (equivalent toRMB 28.2 million) was recognized for the vested options offered to key management grantees for the year ended December 31, 2017, given the Qualified IPOis expected to be consumed within 6 months. A total of US$ 36.7 million (equivalent to RMB 242.9 million) share compensation expense was recognizedimmediately upon the completion of IPO on June 27, 2018. A total of US$21.7 million (equivalent to RMB 150.9 million) share-based compensationexpense was recognized for the vested options offered to management and employees. The Company granted nil and 179,100 restricted shares to Grantees for the year ended December 31, 2017 and 2018, respectively. F-64Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION (CONTINUED) The following table sets forth the restricted shares activity for the year ended December 31, 2018: Number ofshares Weighted averagegrant date fairvalue US$ Unvested as of December 31, 2017—— Granted160,1901.95Vested(26,856)0.39 Unvested as of December 31, 2018133,3342.26 Total share-based compensation cost for the restricted shares amounted to nil and US$ 0.1 million (equivalent to RMB 0.8 million) for the years endedDecember 31, 2017 and 2018, respectively. Other share-based compensation The Company issued and granted 17,742,890 restricted shares to Mr. Kun Dai, Founder and CEO of the Group, on May 14, 2018. The restricted shares werevested immediately upon consummation of a successful IPO of the Company. In June 2018, the Company recorded share-based compensation expense ofUS$ 93.8 million (equivalent to RMB 620.4 million) in general and administrative expense. On May 25, 2018, one of the Company’s executive officers exercised his vested stock options to acquire 3,333,330 ordinary shares of the Company. Inaddition, the Company also offered vesting acceleration to that executive officer’s 1,666,670 unvested stock options on May 25, 2018 and the executiveofficer also exercised such stock options to acquire 1,666,670 ordinary shares of the Company. Therefore, in May 2018, the Company recorded all remainingunrecognized compensation costs which were accelerated in the amount of US$ 4.8 million (equivalent to RMB 31.8 million) in general and administrativeexpense. On June 27, 2018, US$ 0.8 million (equivalent to RMB 5.2 million) share-based compensation was recorded as the redesignation of the Company’s ordinaryshares and super voting power was granted to Class B beneficial owner, Mr. Kun Dai in general and administrative expense. F-65Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 26. SHARE-BASED COMPENSATION (CONTINUED) Stock incentive plan adopted by Fairlubo In 2017, Fairlubo Auction Company Limited, one of the Group’s non-wholly owned subsidiaries adopted and started to operate its own share-basedcompensation plan. Their exercise prices of the share options, as well as the vesting periods of the share options and awarded shares are determined by theboard of directors of this subsidiary at their sole discretion. The share options granted are normally vested over 4-year period, with ¼ of the total shares to bevested on each anniversary of the vesting commencement date, and the exercises of the awards of the Fairlubo are also subject to the completion of an IPO orimmediately prior to a defined corporate transaction, which are considered to be a performance condition of the awards. An IPO or the defined corporatetransaction is not considered to be probable until it is completed. Under ASC 718, compensation cost should be accrued if it is probable that the performancecondition will be achieved. As a result, no compensation expense will be recognized related to the Fairlubo’s stock options until the completion of an IPO orthe corporate transaction, and hence no share-based compensation expense was recognized for the years ended December 31, 2016, 2017 and 2018,respectively. 27. SEGMENT INFORMATION Segments are business units that offer different services and are reviewed separately by the chief operating decision maker (the “CODM”), or the decision-making group, in deciding how to allocate resources and in assessing performance. The CODM, who is responsible for allocating resources and assessing performance of the operating segment, has been identified as Uxin’s Chief ExecutiveOfficer. The Group operates as a single operating segment. The single operating segment is reported in a manner consistent with the internal reporting provided to theCODM. The Group primarily generates its revenues in China, and assets of the Company are also primarily located in China Area. Accordingly, no geographicalsegments are presented. 28. FAIR VALUE MEASUREMENTS Assets and liabilities disclosed at fair value The Company measures its cash and cash equivalents, accounts receivables, financial lease receivables and short-term borrowing at amortized cost. Thecarrying value of accounts receivable and financial lease receivables approximate their fair value which are considered a level 3 measurement. The fair valuewas estimated by discounting the scheduled cash flows through to estimated maturity using estimated discount rates based on current offering rates ofcomparable institutions with similar services. The carrying value of the Company’s debt obligations approximate fair value as the borrowing rates are similarto the market rates that are currently available to the Company for financing obligations with similar terms and credit risks and represent a level 2measurement. The guarantee liabilities are presented as a level 3 measurement, with the fair value estimated by discounting expected future payouts, net lossrates, expected collection rates and a discount rate for time value. Assets measured at fair value on a nonrecurring basis The Company measured its property and equipment, intangible assets and equity method investment at fair value on a nonrecurring basis whenever events orchanges in circumstances indicate that the carrying value may no longer be recoverable. F-66Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 28. FAIR VALUE MEASUREMENTS (CONTINUED) Assets and liabilities measured at fair value on a recurring basis The Company measured its available-for-sale debt security investment, derivative liabilities, and guarantee liabilities at fair value on a recurring basis. As theCompany’s available-for-sale debt security investments, derivative liabilities and guarantee liabilities are not traded in an active market with readilyobservable prices, the Company uses significant unobservable inputs to measure the fair value of available-for-sale investment, derivatives liabilities andguarantee liabilities. These instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fairvalue measurement. The Company did not transfer any assets or liabilities in or out of level 3 during the year ended December 31, 2017 and 2018. The following table summarizes the Company’s financial assets and liabilities measured and recorded at fair value on recurring basis as of December 31, 2017and 2018: As of December 31, 2017Active market Observable input Non-observable input (Level 1) (Level 2) (Level 3) TotalRMB RMB RMB RMBAssets:Short-term investments—1,000—1,000Available-for-sale debt security investment——39,20539,205—1,00039,20540,205 Liabilities:Derivative liabilities——1,596,4241,596,424Guarantee liabilities——173,907173,907——1,770,3311,770,331 As of December 31, 2018Active market Observable input Non-observable input (Level 1) (Level 2) (Level 3) TotalRMB RMB RMB RMBAssets:Short-term investments—553,56842,510596,078Available-for-sale debt security investment——41,17941,179—553,56883,689637,257 Liabilities:Guarantee liabilities——316,064316,064 Refer to Note 13, 16 and 25 for additional information about Level 3 available-for-sale debt security investment, guarantee liabilities and derivativeliabilities measured at fair value on a recurring basis for the year ended December 31, 2017 and 2018. F-67Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 28. FAIR VALUE MEASUREMENTS (CONTINUED) The roll forward of major Level 3 investments are as followings: Total RMB Fair value of Level 3 investments as of December 31, 2016—New addition405,492Disposal of investments(400,101)Effect of exchange rate change(5,391)Fair value of Level 3 investments as of December 31, 2107—New addition237,510Disposal of investments(195,000)Fair value of Level 3 investments as of December 31, 210842,510 Valuation Techniques a. Short-term investment Short-term investment primarily including term deposits and investment products placed with banks with original maturities longer than three months butless than one year. b. Available-for-sale debt security investment Available-for-sale financial assets represent investment of redeemable preferred shares, and fair value of which is determined with reference to the issuanceprice of latest round of financing. c. Derivative liabilities Significant factors, assumptions and methodologies used in determining the business valuation include applying the discounted cash flow approach, andsuch approach involves certain significant estimates which are as follows: Discount rateDLOM Year ended December 31, 201616.5%10%Year ended December 31, 201715%10%Year ended December 31, 2018N/aN/a Discount rates The discount rates listed out in the table above were based on the weighted average cost of capital, which was determined based on a consideration of thefactors including risk-free rate, comparative industry risk, equity risk premium, company size and non-systemic risk factors. Comparable companies In deriving the weighted average cost of capital used as the discount rates under the income approach, certain publicly traded companies were selected forreference as our guideline companies. The guideline companies were selected based on the following criteria: (i) they operate in the used car e-commerceindustry and (ii) their shares are publicly traded in the United States. F-68Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 28. FAIR VALUE MEASUREMENTS (CONTINUED) Discount for lack of marketability, or DLOM. The Finnerty’s Average Strike put options model was used. In this model, the cost of the put option, which can hedge the price change before the privatelyheld shares can be sold, was considered as a basis to determine the DLOM. This option pricing method was used because it takes into account certaincompany-specific factors, including the timing of the expected initial public offering and the volatility of the share price of the guideline companies engagedin the same industry. The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. Our revenues and earningsgrowth rates, as well as major milestones that we have achieved. However, these fair values are inherently uncertain and highly subjective. The assumptionsused in deriving the fair values are consistent with our business plan. These assumptions include: no material changes in the applicable future periods in theexisting political, legal, fiscal or economic conditions in China; no material changes will occur in the current taxation law in China and the applicable taxrates will remain consistent; we have the ability to retain competent management and key personnel to support our ongoing operations; and industry trendsand market conditions for the used car e-commerce businesses will not deviate significantly from current forecasts. These assumptions are inherentlyuncertain. d. Guarantee liabilities The fair value of the guarantee liability at loan inception is estimated by applying several different statistical methods allowing for the different features ofloan products. The assumptions used are based on historical data and supplemented by market benchmarking. The time value of the estimated guaranteeliabilities is recognized through discounting which considers the duration of the future payment pattern. The selected discount rate is based on the one yearbenchmark interest rate published by The People’s Bank of China. Valuation Methodology · Paid Chain-ladder Development (“PCD”) method The PCD method projects ultimate guarantee liability by using historical development patterns of cumulative loan default payments. The historical pattern isshown as the ratios of quarterly increases in cumulative payments by loan origination quarter. The methodology implicitly allows for future inflation as pastinflation is included in the observed factors. The methodology implies that the past payment history is a good estimate for the future pattern of guarantee liability development, assuming stable pricingand claim pattern, and no significant changes in external factors. · Expected Delinquent Ratio (“EDR”) method The EDR method estimates the ultimate guarantee liability by applying the expected delinquent ratio to the total loan amount (total risk exposure). This isdone for different product types and by different loan origination quarter. This method largely relies on the expected delinquent ratios used where the ratios are selected based on historical loss experiences of similar products in themarket, future loss trends and etc. · Paid Bornhuetter-Ferguson (“PBF”) method The PBF method is normally used in situations where the claims data is scarce and/or the loan origination quarters are less matured. The method assumes eachloan origination quarter has an expected delinquent ratio at the outset with an expected pattern of the emergence of loan default payments. F-69Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 28. FAIR VALUE MEASUREMENTS (CONTINUED) There are two major assumptions for this method: (a) The initial expected delinquent ratios which are selected following the same logic of the EDR method; (b) The expected portion of the ultimate yet to be paid which is derived from loan default payment patterns used in PCD method. The estimated ultimate guarantee liabilities from PBF method are then the sum of the following two: (a) Expected ultimate guarantee liabilities that have not been paid as at the valuation date: the product of initial expected ultimate guarantee liabilities,which are the product of the total loan amount and the selected initial expected ultimate delinquent ratio for each loan origination quarter, multiplied by theexpected portion of the ultimate yet to be paid as at the valuation date; and (b) Actual paid claim amount as at the valuation date. · Life Cycle (“LC”) method The LC method first categorizes each loan by its maturity (the difference between the total loan periods and the remaining loan periods). By analyzing thehistorical claim data, we got the actual delinquent ratios for each loan maturity. The cumulative product of the actual delinquent ratios of each maturity isthen the estimated ultimate delinquent ratio. The development to ultimate pattern of each loan maturity is just the following: The actual delinquent ratio at that maturity / The estimated ultimate delinquent ratio Using the above implied pattern, we simulate the development to ultimate pattern for each loan origination month. We then apply the correspondingdevelopment pattern to the specific loan origination month to derive the ultimate guarantee liability for that month Assumptions · Selected Payment Pattern for PCD and PBF Methods Payment patterns are selected for different product groups due to different risk factors. The largest development factor is observed in the second quarter wherethe amount of payment at end of first quarter tends to be 15 to 20 times more when reaching the end of second quarter. The development factors for paymentmatured two quarters and more are in the range of 1.65 to 1.01. · Initial Expected Delinquent Ratios for EDR and PBF Methods The initial expected delinquent ratios used in the EDR and PBF methods are the same and are selected based on the historical experiences and supplementedwith industry benchmark. The range of initial expected delinquent ratios are generally between 4% and 5%. If there are any abnormal loss events, the initialexpected delinquent ratio will be set at a higher level incorporating the actual abnormal loss experiences. · Discount Factors The discount factors are in the range of 0.96 to 1 for guarantee liabilities with different maturities. F-70Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 28. FAIR VALUE MEASUREMENTS (CONTINUED) · Final Selection of Ultimate Delinquent Ratios The selected final ultimate delinquent ratios are weighted average of the estimated delinquent ratios from each valuation method applied, where the weightsare based on the applicability of each valuation method and the historical pattern observed from the historical data: · Sufficient Historical Data For more matured quarters, more weights are given to the PCD method and LC method while for less matured quarters, more weights are given to the PBFmethod. This is in line with the applicability of each method. · Sparse Historical Data More weights are given to the EDR method as the loss pattern from the historical data are much less credible. However, when data becomes more and morecredible, more weights will be given to other methods. · Collection Rate The collection rate used is 50%, 57% and 68% for the years ended December 31, 2016, 2017 and 2018, which is based on the historical experiencesupplemented with market benchmark. 29. NET LOSS PER SHARE Basic and diluted net loss per share for each of the years presented are calculated as follows: Year EndedDecember 31,2016Year EndedDecember 31,2017 Year EndedDecember 31,2018RMBRMB RMB Numerator:Net loss attributable to UXIN Limited(1,357,745)(2,722,596)(1,522,514)Accretion on convertible redeemable Preferred Shares(421,346)(555,824)(318,951)Deemed contribution from Preferred Shareholders3,428——Deemed dividend to Preferred Shareholders—(587,564)(544,773)Deemed dividend from Preferred Shareholders—92,779— Net loss attributable to ordinary shareholders(1,775,663)(3,773,205)(2,386,238) Denominator:Weighted average number of ordinary shares outstanding, basic and diluted49,174,85049,318,860477,848,763 Net loss per share attributable to ordinary shareholders:- Basic(36.11)(76.51)(4.99)- Diluted(36.11)(76.51)(4.99) F-71Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 29. NET LOSS PER SHARE (CONTINUED) For the year ended December 31, 2016, 2017 and 2018, assumed conversion of the Preferred Shares has not been reflected in the dilutive calculationspursuant to ASC 260, “Earnings Per Share,” due to the anti-dilutive effect. The effects of all outstanding share options and conversion of convertible noteshave also been excluded from the computation of diluted loss per share for the year ended December 31, 2016, 2017 and 2018, respectively, as their effectswould be anti-dilutive otherwise. 30. EMPLOYEE BENEFIT Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits,medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiaries,VIEs and VIEs’ subsidiaries of the Group make contributions to the government for these benefits based on certain percentage of the employees’ salaries, upto a maximum amount specified by the government. The Group has no legal obligation for the benefits beyond the contribution made. The total amounts charged to the Consolidated Statements of Comprehensive Loss for such employee benefits amounted to approximately RMB717.7million, RMB1,275.9 million and RMB2,099.7 million for the year ended December 31, 2016, 2017 and 2018. 31. COMMITMENTS AND CONTINGENCIES Operating lease commitments The Group leases office under non-cancelable operating lease agreements. Future minimum lease payments under non-cancelable operating lease agreementswith initial terms of one year or more consist of the following: As of December 31, 2018 RMB 2019102,057202051,969202130,392202226,913202323,203Thereafter110,980345,514 The total amounts charged to the Consolidated Statements of Comprehensive Loss for rental expense amounted to approximately RMB 102.5 million,RMB137.2 million and RMB201.8 million for the years ended December 31, 2016, 2017 and 2018. Contingencies In the ordinary course of business, the Group is from time to time involved in legal proceedings and litigations. During 2017, one competitor of the Grouphas filed lawsuits against the Group relating to disputes with respect to trademarks. In January 2019, the other competitor of the Group has filed lawsuitsagainst the Group relating to disputes with respect to unfair competition. These cases are still at the preliminary stage, but the Group believes the claims arewithout merit and will defend these actions vigorously. The Group is unable, however, to predict the outcome of these cases, or reasonably estimate a range ofpossible loss, if any, given the current status of the litigation. No accrual has been recorded by the Group as of December 31, 2017 and 2018 in respect ofthese cases. F-72Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 32. CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Group to the concentration of credit risks consist of cash and cash equivalents and advance to consumerson behalf of financing partners. The Group deposits its cash and cash equivalents with financial institutions located in jurisdictions where the subsidiaries are located. The Companybelieves that no significant credit risk exists as these financial institutions and financing partners have high credit quality. Substantially all revenue was derived from customers located in China. No single customer accounted for more than 10% of the Company’s consolidatedrevenue in any of the periods presented. 33. SUBSEQUENT EVENTS The Company has evaluated the subsequent events through the date of issuance of these financial statement. 34. STATUTORY RESERVES AND RESTRICTED NET ASSETS Pursuant to laws applicable to entities incorporated in the PRC, the Group’s subsidiaries in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staffbonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires an annual appropriation of 10% of after tax profit (asdetermined under accounting principles generally accepted in the PRC at each year-end) until the accumulative amount of such reserve fund reaches 50% ofa company’s registered capital; the other fund appropriations are at the subsidiaries’ discretion. These reserve funds can only be used for specific purposes ofenterprise expansion and staff bonus and welfare and are not distributable as cash dividends. During the year ended December 31, 2016, 2017 and 2018, noappropriations to the statutory reserve, enterprise expansion fund and staff welfare and bonus fund have been made by the Group. In addition, due to restrictions on the distribution of share capital from the Group’s PRC subsidiaries and also as a result of these entities’ unreservedaccumulated losses, total restrictions placed on the distribution of the Group’s PRC subsidiaries’ net assets was RMB978.2 million, or 41.1% of the Group’stotal consolidated net assets as of December 31, 2018 (RMB779.3 million, or 326.05% as of December 31, 2017). The Company performed a test on the restricted net assets of consolidated subsidiaries in accordance with Securities and Exchange Commission RegulationS-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements forthe parent company. The subsidiaries did not pay any dividend to the Company for the periods presented. For the purpose of presenting parent only financial information, theCompany records its investments in its subsidiaries under the equity method of accounting. Such investments are presented on the separate condensedbalance sheets of the Company as “investments deficit in subsidiaries” and the loss of the subsidiaries is presented as “share of loss of subsidiaries”. Certaininformation and footnote disclosures generally included in financial statements prepared in accordance with US GAAP have been condensed and omitted. The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2017 and 2018. F-73Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 35. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY Balance sheets As of December 31, 2017 As of December 31, 2018RMB RMB ASSETSCurrent assets:Cash and cash equivalents77,81910,288Short-term investment—553,568Prepaid expenses—23,100Amounts due from related parties5,916,4689,318,188Other receivables28,63118,015Total assets6,022,9189,923,159 LIABILITIES AND EQUITY Current liabilitiesOther payables and accruals45,76510,584Investment deficit in subsidiaries3,977,6726,195,553Amounts due to related parties—90,251Convertible notes—1,188,192Derivative liabilities1,546,646—Other current liabilities163,35564,446 Total liabilities5,733,4387,549,026 Mezzanine equity Series A redeemable convertible preference shares (US$0.0001 par value, 50,000,000 shares authorized,issued and outstanding as of December 31, 2017)94,411—Series A-1 redeemable convertible preference shares (US$0.0001 par value, 4,910,890 shares authorized,issued and outstanding as of December 31, 2017)69,193—Series B convertible redeemable preferred shares (US$ 0.0001 par value, 70,602,630 shares authorized,issued and outstanding as of December 31, 2017)180,294— F-74Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 35. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED) Balance sheets (continued) As of December 31, 2017 As of December 31,2018 RMB RMB Mezzanine equity (continued) Series C convertible redeemable preferred shares (US$ 0.0001 par value, 97,267,680 shares authorized,issued and outstanding as of December 31, 2017)408,559—Series D convertible redeemable preferred shares (US$ 0.0001 par value, 159,355,150 shares authorized,issued and outstanding as of December 31, 2017)1,703,667—Series E convertible redeemable preferred shares (US$ 0.0001 par value, 89,477,490 shares authorized,issued and outstanding as of December 31, 2017)1,146,351—Series F convertible redeemable preferred shares (US$ 0.0001 par value, 85,162,200 shares authorized,issued and outstanding as of December 31, 2017)1,563,657—Series G convertible redeemable preferred shares (US$ 0.0001 par value, 130,384,730 shares authorized,issued and outstanding as of December 31, 2017)3,214,932—Redeemable non-controlling interests39,580— Total mezzanine equity8,420,644— Shareholders’ (deficit)/equity Ordinary shares (US$0.0001 par value, 1,312,839,230 shares and 10,000,000,000 shares authorized as ofDecember 31, 2017 and 2018, respectively; 49,318,860 shares issued and outstanding as ofDecember 31, 2017; 839,850,038 Class A ordinary shares and 40,809,861 Class B ordinary shares issuedand outstanding as of December 31, 2018)30575Additional paid-in capital—12,967,986Accumulated other comprehensive income76,60786,061Accumulated deficit(8,207,801)(10,680,489) Total shareholders’ (deficit)/equity(8,131,164)2,374,133 Total liabilities, mezzanine equity and shareholders’ equity6,022,9189,923,159 F-75Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 35. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED) Statements of comprehensive loss Year EndedDecember 31,2016Year EndedDecember 31,2017 Year EndedDecember 31,2018 RMBRMB RMB Total revenues——4,497Cost of revenues——(147)Gross profit——4,350 Operation expenseSales and marketing——(34,591)Research and development——(17,376)General and administrative(268,084)(171,172)(1,019,055)Total operating expenses(268,084)(171,172)(1,071,022) Loss from operations——(1,066,672) Share of loss of subsidiaries and VIEs(994,542)(1,703,491)(1,641,754)Interest income/(expense), net7,15517,849(25,262)Other (expense)/income, net(16)(14)4,213Foreign exchange gain1,2303,8492,951Fair value change of derivative liabilities(103,488)(869,617)1,204,010Net loss(1,357,745)(2,722,596)(1,522,514) Accretion on redeemable preferred shares to redemption value(421,346)(555,824)(318,951)Deemed contribution from Preferred Shareholders3,428——Deemed dividend to Preferred Shareholders—(587,564)(544,773)Deemed dividend on Preferred Shareholders—92,779—Net loss attributable to ordinary shareholders(1,775,663)(3,773,205)(2,386,238) Net loss(1,357,745)(2,722,596)(1,522,514)Other comprehensive incomeForeign currency translation(6,995)46,06511,406Total comprehensive loss(1,364,740)(2,676,531)(1,511,108) F-76Table of Contents UXIN LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(All amounts in thousands, except for share and per share data, unless otherwise noted) 35. CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED) Statements of cash flows Year EndedDecember 31,2016 Year EndedDecember 31,2017 Year EndedDecember 31,2018RMB RMB RMB Net cash (used in)/generated from operating activities(816)6,080(55,088)Net cash generated from/(used in) investing activities144,064102,577(3,999,403)Net cash (used in)/generated from financing activities(143,835)(29,042)3,982,230Effect of exchange rate changes on cash and cash equivalents34(2,592)4,730Net (decrease)/increase in cash and cash equivalents(553)77,023(67,531)Cash and cash equivalents at beginning of the year1,34979677,819Cash and cash equivalents at end of the year79677,81910,288 F-77Exhibit 4.1 UXIN LIMITED 2018 SECOND AMENDED AND RESTATED SHARE INCENTIVE PLAN 1. Purposes of the Plan. The purposes of this 2018 Second Amended and Restated Share Incentive Plan (the “Plan”) are to attract and retain thebest available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.The Plan amends and restates the previously adopted 2018 Amended and Restated Share Incentive Plan of the Company in its entirety and assumes allawards granted under the previous 2018 Amended and Restated Share Incentive Plan. 2. Definitions. The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in anindividual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definitioncontained in this Section 2. (a) “Administrator” means the Board or any of the Committees appointed by the Board to administer the Plan. (b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under theExchange Act. (c) “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federalsecurities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of anyjurisdiction applicable to Awards granted to residents therein. (d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) thecontractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent inconnection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject tothe Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the CorporateTransaction as determined in accordance with the instruments evidencing the agreement to assume the Award. (e) “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Share, Restricted Share Unit or other right orbenefit under the Plan. (f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee,including any amendments thereto. (g) “Board” means the Board of Directors of the Company. (h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that suchtermination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such RelatedEntity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentionalmisconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust,or physical or emotional harm to any person.  (i) “Change in Control” means (as determined by the Administrator acting reasonably) a change in ownership or control of theCompany after the Registration Date effected through the following transactions: the direct or indirect acquisition by any person or related group of persons(other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, iscontrolled by, or is under common control with, the Company) of beneficial ownership of securities possessing more than fifty percent (50%) of the totalcombined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders whicha majority of the Directors who are not affiliates or associates of the offeror do not recommend such shareholders accept. (j) “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan. (k) “Company” means UXIN LIMITED, a company incorporated under the laws of the Cayman Islands or any successor corporationthat adopts the Plan in connection with a Change in Control. (l) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’scapacity as an Employee or Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company orsuch Related Entity. (m) “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee,Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director orConsultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entitynotwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective underApplicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon theentity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) anyapproved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or(iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director orConsultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any otherauthorized personal leave. (n) “Corporate Transaction” means (as determined by the Administrator acting reasonably) any of the following transactions:  (i) a merger, amalgamation, consolidation or other business combination of the Company with or into any person, or anyother transaction or series of transactions, as a result of which the shareholders of the Company immediately prior to such transaction or series of transactionswill cease to own a majority of the voting power of the surviving entity immediately after consummation of such transaction or series of transactions, butexcluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; (ii) the sale, lease, transfer, exclusive license to a third party or other disposition of all or substantially all of the assets of theCompany; (iii) any complete liquidation, winding-up, or dissolution of the Company; or (iv) the sale (whether by merger, reorganization or other transaction) of a majority of the outstanding voting securities of theCompany but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction. (o) “Director” means a member of the Board or the board of directors of any Related Entity. (p) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Granteeprovides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides servicedoes not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the positionheld by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. AGrantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in itsdiscretion. (q) “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect toOrdinary Shares. (r) “Drag-Along Transaction” have the meaning as defined in the shareholders agreement of the Company, as amended from time totime. (s) “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity,subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company. (t) “Exchange Act” means the Securities Exchange Act of 1934, as amended. (u) “Expiration Date” means February 13, 2028.  (v) “Fair Market Value” means, as of any date, the value of Ordinary Shares determined as follows: (i) If the Ordinary Shares are traded on a securities exchange, the value shall be deemed to be the average of the security’sclosing prices on such exchange over the thirty (30) day period ending one (1) day prior to the distribution, as reported in The Wall Street Journal or suchother source as the Administrator deems reliable; (ii) If the Ordinary Shares are traded over-the-counter, the value shall be deemed to be the average of the closing bid pricesover the thirty (30) day period ending three (3) days prior to the distribution as reported in The Wall Street Journal or such other source as the Administratordeems reliable; and (iii) In the absence of an established market for the Ordinary Shares of the type described in (i) and (ii), above, the Fair MarketValue thereof shall be determined by the Administrator on the basis of the Company’s valuation in the Company’s latest round of financing. The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be adjusted to make anappropriate discount from the market value determined as above in sub-clauses (i), (ii) or (iii) to reflect the fair market value thereof as determined in goodfaith by the Administrator, or by a liquidator if one is appointed. (w) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan. (x) “IPO” shall mean the Company’s first firm commitment underwritten public offering of any of its securities or the same class ofsecurities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Ordinary Shares tothe general public pursuant to (a) a registration statement filed under the Securities Act of 1933, as amended, or (b) the securities laws applicable to anoffering of securities in another jurisdiction pursuant to which such securities will be listed on an internationally recognized securities exchange. (y) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan. (z) “Ordinary Share” means class A ordinary share of US$0.0001 nominal or par value, of the Company. (aa) “Parent” means any company (other than the Company) in an unbroken chain of companies ending with the Company, if each ofthe companies other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the othercompanies in such chain. A company that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing asof such date.  (bb) “Plan” means this 2018 Second Amended and Restated Share Incentive Plan, as it may be amended from time to time. (cc) “Registration Date” means the first to occur of (i) the closing of IPO; and (ii) in the event of a Corporate Transaction, the date ofthe consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such CorporateTransaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and ExchangeCommission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction. (dd) “Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liabilitycompany or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly. (ee) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable share or stock award or a cashincentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Awardexisting at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting scheduleapplicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding andconclusive. (ff) “Restricted Share” means a Share issued under the Plan to the Grantee for such consideration, if any, and subject to suchrestrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by theAdministrator. (gg) “Restricted Share Units” means an Award which may be earned in whole or in part upon the passage of time or the attainment ofperformance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or othersecurities as established by the Administrator. (hh) “SAR” means a share appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator,measured by appreciation in the value of Ordinary Shares. (ii) “Share” means an Ordinary Share of the Company. (jj) “Spin-off Transaction” means a distribution by the Company to its shareholders of all or any portion of the securities of anySubsidiary of the Company. (kk) “Subsidiary” means, with respect to a specific entity, (i) any entity (x) more than fifty percent (50%) of whose shares or otherinterests entitled to vote in the election of directors or (y) more than a fifty percent (50%) interest in the profits or capital of such entity are owned orcontrolled directly or indirectly by the subject entity or through one (1) or more Subsidiaries of the subject entity, (ii) any entity whose assets, or portionsthereof, are consolidated with the net earnings of the subject entity and are recorded on the books of the subject entity for financial reporting purposes inaccordance with the International Financial Reporting Standards, or (iii) any entity with respect to which the subject entity has the power to otherwise directthe business and policies of that entity directly or indirectly through another Subsidiary.  3. Shares Subject to the Plan. (a) Subject to the provisions of Section 10 below, the maximum aggregate number of Shares which may be issued pursuant to all Awardsis 102,040,053 Shares (proportionally adjusted to reflect any share dividends, share splits, or similar transactions) (the “Award Pool”). The Awards grantedand outstanding under the 2018 Amended and Restated Share Incentive Plan shall survive the termination of the 2018 Amended and Restated ShareIncentive Plan as provided for under Section 22 and shall be counted against the Award Pool under the Plan. (b) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily orinvoluntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued underthe Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available forfuture issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price ortheir Fair Market Value at the time of repurchase, such Shares shall become available automatically for future grant under the Plan. To the extent notprohibited by the listing requirements of the Nasdaq National Market (or other established stock exchange or national market system on which the OrdinaryShares are traded) and Applicable Law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price or(ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determiningthe maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator. 4. Administration of the Plan. (a) Plan Administrator. (i) Administration. The Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, whichCommittee shall be constituted in accordance with the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacityuntil otherwise directed by the Board. The Board may authorize one or more officers to grant such Awards and may limit such authority as the Boarddetermines from time to time. (ii) Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of thissubsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.  (b) Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to theAdministrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion: (i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder; (ii) to determine whether and to what extent Awards are granted hereunder; (iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder; (iv) to approve forms of Award Agreements for use under the Plan; (v) to determine the terms and conditions of any Award granted hereunder (including the vesting schedule set forth in theNotice of Stock Option Award and Award Agreements); (vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adverselyaffect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent; (vii) to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or AwardAgreement, granted pursuant to the Plan; and (viii) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate. (c) Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Employees of theCompany or a Related Entity, members of the Board and any Employees of the Company or a Related Entity to whom authority to act for the Board, theAdministrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis againstall reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suitor proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under orin connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement isapproved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation tomatters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith orintentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, suchperson shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.  5. Eligibility. Awards may be granted to Employees, Directors and Consultants. An Employee, Director or Consultant who has been granted anAward may, if otherwise eligible, be granted additional Awards. 6. Terms and Conditions of Awards. (a) Types of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director orConsultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or(iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversionprivilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awardsinclude, without limitation, Options, SARs, sales or bonuses of Restricted Share, Restricted Share Units or Dividend Equivalent Rights, and an Award mayconsist of one such security or benefit, or two (2) or more of them in any combination or alternative. (b) Designation of Award. Each Award shall be designated in the Award Agreement. (c) Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of eachAward including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash,Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteriaestablished by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) totalshareholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income,(x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation,(xvi) economic value added and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individualbusiness units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to thedegree of achievement as specified in the Award Agreement. (d) Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitutionfor, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest inanother entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction. (e) Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees theopportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the electionwould entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures,the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration sodeferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.  (f) Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuingparticular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time. (g) Early Exercise. The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while anEmployee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to suchexercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to beappropriate. (h) Term of Award. The term of each Award shall be the term stated in the Award Agreement. Notwithstanding the foregoing, thespecified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to theAward. (i) Transferability of Awards. Subject to the Applicable Laws, Awards shall be transferable (i) by will and by the laws of descent anddistribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator. Notwithstanding the foregoing, theGrantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided bythe Administrator. (j) Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes thedetermination to grant such Award, or such other date as is determined by the Administrator. 7. Award Exercise or Purchase Price, Consideration and Taxes. (a) Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be determined by the Administrator. Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d) above, the exercise or purchase pricefor the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award. (b) Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of anAward including the method of payment, shall be determined by the Administrator. In addition to any other types of consideration the Administrator maydetermine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:  (i) cash; (ii) check; (iii) if the exercise or purchase occurs on or after the Registration Date, surrender of Shares or delivery of a properly executedform of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to theaggregate exercise price of the Shares as to which said Award shall be exercised, provided, however, that Shares acquired under the Plan or any other equitycompensation plan or agreement of the Company must have been held by the Grantee for a period of more than six (6) months (and not used for anotherAward exercise by attestation during such period); (iv) with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale andremittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediatesale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Sharesand (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order tocomplete the sale transaction; or (v) any combination of the foregoing methods of payment. The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwiserestrict one or more forms of consideration. (c) Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has madearrangements acceptable to the Administrator for the satisfaction of any income and employment tax withholding obligations under any Applicable Laws. Upon exercise of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations. 8. Exercise of Award. (a) Procedure for Exercise; Rights as a Shareholder. (i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by theAdministrator under the terms of the Plan and specified in the Award Agreement. (ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company inaccordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award isexercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).  (b) Exercise of Award Following Termination of Continuous Service. (i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may beexercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement. (ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’sContinuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of theoriginal term of the Award, whichever occurs first. (c) Exercise in Violation of Applicable Law. Notwithstanding the foregoing, regardless of whether an Award has otherwise becomeexercisable, the Award may not be exercised if the Administrator (in its sole discretion) determines that an exercise could violate any Applicable Laws. 9. Conditions Upon Issuance of Shares. (a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery ofsuch Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect tosuch compliance. (b) As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant atthe time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if,in the opinion of counsel for the Company, such a representation is required by any Applicable Laws. (c) As a condition to the exercise of an Award and subject to the Award Agreement, the Grantee shall grant a power of attorney to theBoard or any person designated by the Board to exercise the voting rights with respect to the Shares and the Company may require the person exercisingsuch Award to acknowledge and agree to be bound by the provisions of the shareholders agreement entered into by and among the shareholders of theCompany from time to time, as if the Grantee is a holder of Ordinary Shares thereunder. 10. Adjustments Upon Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Sharescovered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yetbeen granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares withrespect to which Awards may be granted to any Grantee in any fiscal year of the Company, as well as any other terms that the Administrator determinesrequire adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a share split, reverse sharesplit, share dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the numberof issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transactionwith respect to Ordinary Shares including a corporate merger, consolidation, acquisition of property or equity, separation (including a spin-off or otherdistribution of shares or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion ofany convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made bythe Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company ofshares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, thenumber or price of Shares subject to an Award. In the event of a Spin-off Transaction, the Administrator may in its discretion make such adjustments and takesuch other action as it deems appropriate with respect to outstanding Awards under the Plan, including but not limited to: (i) adjustments to the number andkind of Shares, the exercise or purchase price per Share and the vesting periods of outstanding Awards, (ii) prohibit the exercise of Awards during certainperiods of time prior to the consummation of the Spin-off Transaction, or (iii) the substitution, exchange or grant of Awards to purchase securities of theSubsidiary; provided that the Administrator shall not be obligated to make any such adjustments or take any such action hereunder.  11. Corporate Transactions and Changes in Control. (a) Termination of Award to the Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a CorporateTransaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed inconnection with the Corporate Transaction. (b) Acceleration of Award upon Corporate Transaction or Change in Control. (i) Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a CorporateTransaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested andexercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at thetime represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’sContinuous Service has not terminated prior to such date. The portion of the Award that is not Assumed shall terminate under subsection (a) of thisSection 11 to the extent not exercised prior to the consummation of such Corporate Transaction. (ii) Change in Control. Except as provided otherwise in an individual Award Agreement, in the event of a Change in Control(other than a Change in Control which also is a Corporate Transaction), each Award which is at the time outstanding under the Plan automatically shallbecome fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value),immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Award, provided that theGrantee’s Continuous Service has not terminated prior to such date.  12. Effective Date and Term of Plan. The Plan is effective as of the date it is adopted and approved by the Board (the “Effective Date”). Subject toApplicable Laws, Awards may be granted under the Plan upon its becoming effective. The Plan will expire on, and no Award may be granted pursuant to thePlan after, the Expiration Date. Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan and theapplicable Award Agreement. 13. Amendment, Suspension or Termination of the Plan. (a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made withoutthe approval of the Company’s shareholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of theprovisions of Section 4(b)(vi) or this Section 13(a). (b) No Award may be granted during any suspension of the Plan or after termination of the Plan. (c) No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rightsunder Awards already granted to a Grantee. 14. Reservation of Shares. (a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient tosatisfy the requirements of the Plan. (b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by theCompany’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of thefailure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 15. No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to theGrantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate theGrantee’s Continuous Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminatethe employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminatedfor Cause for the purposes of this Plan. 16. No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or aRelated Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company ora Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which theavailability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee RetirementIncome Security Act of 1974, as amended.  17. Vesting Schedule. The Awards to be issued to any Grantee under the Plan shall be subject to the vesting schedule as specified in the AwardAgreement. . 18. Drag-Along Transaction. In the event of a Drag-Along Transaction, the Grantees who hold any Shares upon exercise of the Award shall sell,transfer, convey or assign all of their Shares pursuant to, and so as to give effect to, the Drag-Along Transaction, and each of such Grantees shall grant to thethen current chief executive officer of the Company or an authorized officer, a power of attorney to transfer his/her Shares and to do and carry out all otheracts and to sign all other documents that are necessary or advisable to complete the Drag-Along Transaction. 19. IPO. In the case of an IPO, the Grantees shall enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by theCompany for the purpose of the IPO, and each of such Grantees shall grant to the then current chief executive officer or other authorized officer of theCompany a power of attorney to enter into any agreements with any underwriter, coordinator, bankers or sponsor elected by the Company and to do and carryout all the acts and to sign all the documents that are necessary or advisable to complete the IPO. 20. Unfunded Obligation. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any specialaccounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, whichthe Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee accountshall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwisecreate any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have noclaim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respectto the Plan. 21. Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provisionof the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term“or” is not intended to be exclusive, unless the context clearly requires otherwise. 22. Replacement of the 2018 Amended and Restated Share Incentive Plan. The Plan shall replace the 2018 Amended and Restated Share IncentivePlan in its entirety, and the 2018 Amended and Restated Share Incentive Plan shall cease to be effective upon the Effective Date (as defined in Section 12).The Awards granted and outstanding under the 2018 Amended and Restated Share Incentive Plan and the evidencing original Award Agreements shallsurvive the termination of the 2018 Amended and Restated Share Incentive Plan and remain effective and binding under the Plan, subject to any amendmentand modification to the original Award Agreements that the Administrator, in its sole discretion, shall determine. Exhibit 4.20 POWER OF ATTORNEY We, Youxin Yishouche (Beijing) Information Technology Co., Ltd. (the “Company”), a limited liability company organized and existing under thelaws of the PRC, with its address Room 323602, F36, Building 5, Yard 1, Futong East Street, Chaoyang District, Beijing, and a holder of 100% of the entireregistered capital in Beijing Fengshun Lubao Vehicle Auction Co., Ltd. (the “Domestic Company”) as of the date when the Power of Attorney is executed,hereby irrevocably authorize Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. (formerly known as Beijing Fengshun Lubao Network InformationTechnology Co., Ltd.) (“WFOE”) to exercise the following rights relating to all equity interests held by the Company now and in the future in the DomesticCompany (“Our Shareholding”) during the term of this Power of Attorney: The WFOE is hereby authorized to act on behalf of the Company as our exclusive agent and attorney with respect to all matters concerning OurShareholding, including without limitation to: (1) attending shareholders’ meetings of the Domestic Company; (2) exercising all the shareholder’s rights andshareholder’s voting rights the Company is entitled to under the laws of China and the Domestic Company’s Articles of Association, including but notlimited to the sale or transfer or pledge or disposition of Our Shareholding in part or in whole; and (3) designate and appoint on behalf of the Company thelegal representative, the directors, supervisors, the chief executive officer and other senior management members of the Domestic Company. Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of the Company itself executeall the documents the Company shall sign as stipulated in the Exclusive Option Agreement entered into by and among the Company, the WFOE and theDomestic Company on July 20, 2018 and the Equity Pledge Agreement entered into by and among the Company, the WFOE and Domestic Company onJuly 20, 2018 (including any modification, amendment and restatement thereto, collectively the “Transaction Documents”), and perform the terms of theTransaction Documents. All the actions associated with Our Shareholding conducted by the WFOE shall be deemed as the Company’s own actions, and all the documents relatedto Our Shareholding executed by the WFOE shall be deemed to be executed by the Company. The Company hereby acknowledges and ratifies those actionsand/or documents by the WFOE. The WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and withoutgiving prior notice to the Company or obtaining the Company’s consent. If required by PRC laws, the WFOE shall designate a PRC citizen to exercise theaforementioned rights. During the period that the Company is a shareholder of the Domestic Company, this Power of Attorney shall be irrevocable and continuously effectiveand valid from the date of execution of this Power of Attorney. During the term of this Power of Attorney, the Company hereby waives all the rights associated with Our Shareholding, which have been authorized tothe WFOE through this Power of Attorney, and shall not exercise such rights by the Company. 1 This Power of Attorney is written in Chinese and English. The Chinese version and English version shall have equal legal validity. This Power of Attorney is signed on July 20, 2018. 2 Youxin Yishouche (Beijing) Information Technology Co., Ltd. By:Zheng ZengName:Zheng ZengTitle:Legal Representative Accepted by Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative Acknowledged by: Beijing Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative 3Exhibit 4.21 EXCLUSIVE OPTION AGREEMENT This Exclusive Option Agreement (this “Agreement”) is executed by and among the following Parties as of July 20, 2018 in Beijing, the People’sRepublic of China (“China” or the “PRC”): Party A: Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. (formerly known as Beijing Fengshun Lubao Network Information TechnologyCo., Ltd.), a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room 1632, #1-16,Building 1, No. A6, Jianguomenwai Street, Chaoyang District, Beijing; Party B: Youxin Yishouche (Beijing) Information Technology Co., Ltd., a limited liability company organized and existing under the laws of thePRC, with its address at Room 323602, F36, Building 5, Yard 1, Futong East Street, Chaoyang District, Beijing; and Party C: Beijing Fengshun Lubao Vehicle Auction Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with itsaddress at Room 1416, F/14, Fengkai Wangyuan Technology Incubation Center (Wangyuan Tower), #56 West Fourth Ring South Road,Fengtai District, Beijing. In this Agreement, each of Party A, Party B and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the“Parties”. Whereas: 1. Party B is a shareholder of Party C and as of the date hereof holds 100% of equity interests of Party C, representing RMB20,000,000 in the registeredcapital of Party C. 2. Party B agrees to grant Party A an exclusive right through this Agreement, and Party A agrees to accept such exclusive right to purchase all or partequity interest held by Party B in Party C. Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement: 1. Sale and Purchase of Equity Interest 1.1 Option Granted In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B herebyirrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”) to purchase theequity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole and absolutediscretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the “Equity InterestPurchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or otherrights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option toParty A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporateorganizations. 1 1.2 Steps for Exercise of Equity Interest Purchase Option Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a writtennotice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s or the Designee’s decision to exercise the EquityInterest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the “Optioned Interests”);and (c) the date for purchasing the Optioned Interests or the date for transfer of the Optioned Interests. 1.3 Equity Interest Purchase Price The purchase price of the Optioned Interests (the “Base Price”) shall be RMB 10. If PRC law requires a minimum price higher than the BasePrice when Party A exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price(collectively, the “Equity Interest Purchase Price”). 1.4 Transfer of Optioned Interests For each exercise of the Equity Interest Purchase Option: 1.4.1 Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’stransfer of the Optioned Interests to Party A and/or the Designee(s); 1.4.2 Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the equity interest toParty A and/or the Designee(s) and waiving any right of first refusal related thereto; 1.4.3 Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever isapplicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding theOptioned Interests; 1.4.4 The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licensesand permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the OptionedInterests. For the purpose of this Section and this Agreement, “security interests” shall include securities, mortgages, third party’srights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other securityarrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B’s Equity Interest PledgeAgreement and Party B’s Power of Attorney. “Party B’s Equity Interest Pledge Agreement” as used in this Agreement shall refer to theInterest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendmentand restatement thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed byParty B on the date hereof granting Party A with power of attorney and any modification, amendment and restatement thereto. 2 2. Covenants 2.1 Covenants regarding Party C Party B (as a shareholder of Party C) and Party C hereby covenant as follows: 2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association ofParty C, increase or decrease its registered capital, or change its structure of registered capital in other manners; 2.1.2 They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, obtain andmaintain all necessary government licenses and permits by prudently and effectively operating its business and handling its affairs; 2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of inany manner any material assets of Party C or legal or beneficial interest in the material business or revenues of Party C of more thanRMB50,000, or allow the encumbrance thereon of any security interest; 2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except forpayables incurred in the ordinary course of business other than through loans; 3 2.1.5 They shall always operate all of Party C’s businesses in the ordinary course of business to maintain the asset value of Party C and refrainfrom any action/omission that may affect Party C’s operating status and asset value; 2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in theordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB10,000,000 shall be deemed a majorcontract); 2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit; 2.1.8 They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request; 2.1.9 If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance carrieracceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses; 2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in anyperson; 2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrativeproceedings relating to Party C’s assets, business or revenue; 2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary orappropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against all claims; 2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to itsshareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to itsshareholders; 2.1.14 At the request of Party A, they shall appoint any person designated by Party A as the director or executive director of Party C. 2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates; and 2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A. 4 2.2 Covenants of Party B Party B hereby covenants as follows: 2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal orbeneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed inaccordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; 2.2.2 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting and/or the directors (or the executivedirector) of Party C not to approve any sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest inthe equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the interest placedin accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney; 2.2.3 Without the prior written consent of Party A, Party B shall cause the shareholders’ meeting or the directors (or the executive director) ofParty C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person; 2.2.4 Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrativeproceedings relating to the equity interests in Party C held by Party B; 2.2.5 Party B shall cause the shareholders’ meeting or the directors (or the executive director) of Party C to vote their approval of the transferof the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A; 2.2.6 To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate documents, takeall necessary or appropriate actions, file all necessary or appropriate complaints, and raise necessary or appropriate defenses against allclaims; 2.2.7 Party B shall appoint any designee of Party A as the director or the executive director of Party C, at the request of Party A; 2.2.8 Party B hereby waives its right of first of refusal to transfer of equity interest by any other shareholder of Party C to Party A (if any), andgives consent to execution by each other shareholder of Party C with Party A and Party C the exclusive option agreement, the equityinterest pledge agreement and the power of attorney similar to this Agreement, Party B’s Equity Interest Pledge Agreement and Party B’sPower of Attorney and undertakes not to take any action in conflict with such documents executed by the other shareholders; 5 2.2.9 Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated byParty A to the extent permitted under applicable PRC laws; and 2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B,Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect theeffectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subjectto this Agreement hereunder or under the Party B’s Equity Interest Pledge Agreement or under the Party B’s Power of Attorney, Party Bshall not exercise such rights except in accordance with the written instructions of Party A. 3. Representations and Warranties Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of theOptioned Interests, that: 3.1 They have the power, capacity and authority to execute and deliver this Agreement and any equity interest transfer contracts to which they areparties concerning the Optioned Interests to be transferred thereunder (each, a “Transfer Contract”), and to perform their obligations under thisAgreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreementupon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constituteor will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof; 3.2 Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,delivery and performance of this Agreement. 3.3 The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contractsshall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or otherorganizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding onthem, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause anyviolation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause thesuspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them; 6 3.4 Party B has a good and merchantable title to the equity interests held by Party B in Party C. Except for Party B’s Equity Interest PledgeAgreement and Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests; 3.5 Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets; 3.6 Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party Afor which Party A’s written consent has been obtained. 3.7 Party C has complied with all laws and regulations of China applicable to asset acquisitions; and 3.8 There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of PartyC or Party C. 4. Effective Date and Term This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C havebeen transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement. 5. Governing Law and Resolution of Disputes 5.1 Governing law The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereundershall be governed by the laws of PRC. 5.2 Methods of Resolution of Disputes In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute throughfriendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the otherParties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic andTrade Arbitration Commission for arbitration, in accordance with its arbitration rules. The arbitration shall be conducted in Beijing. Thearbitration award shall be final and binding on all Parties. 7 6. Taxes and Fees Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of Chinain connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactionscontemplated under this Agreement and the Transfer Contracts. 7. Notices 7.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent byregistered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. Aconfirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shallbe determined as follows: 7.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on thedate of receipt or refusal at the address specified for notices; 7.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 7.2 For the purpose of notices, the addresses of the Parties are as follows: Party A:Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd.Address:Miaopu, #35 Dahuangzhuang, Chaoyang District, BeijingAttn:Wang KunPhone:86 10 80180316Facsimile:86 10 80180396 Party B:Youxin Yishouche (Beijing) Information Technology Co., Ltd.Address:Floor 3rd, Building E, Lei Shing Hong Center, No. 8, Guanshun South Street, Chaoyang District, BeijingAttn:Cai NaFacsimile:010-84752441 Party C:Beijing Fengshun Lubao Vehicle Auction Co., Ltd.Address:Miaopu, #35 Dahuangzhuang, Chaoyang District, BeijingAttn:Wang KunPhone:86 10 80180316Facsimile:86 10 80180396 8 7.3 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 8. Confidentiality The Parties acknowledge that the existence and the terms of this Agreement, and any oral or written information exchanged between the Parties inconnection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality ofall such confidential information, and without obtaining the written consent of other Parties, it shall not disclose any relevant confidential informationto any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorizeddisclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the courtor other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financialadvisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisorsshall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by theshareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party andsuch Party shall be held liable for breach of this Agreement. 9. Further Warranties The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposesof this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of thisAgreement. 10. Breach of Agreement 10.1 If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and/orrequire the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein; 10.2 Party B or Party C shall not have any right to terminate this Agreement in any event unless otherwise required by applicable laws. 11. Miscellaneous 11.1 Amendment, change and supplement Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties. 9 11.2 Entire agreement Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitutethe entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral andwritten consultations, representations and contracts reached with respect to the subject matter of this Agreement. 11.3 Headings The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of theprovisions of this Agreement. 11.4 Language This Agreement is written in both Chinese and English language in three copies, each Party having one copy. The Chinese version andEnglish version shall have equal legal validity. 11.5 Severability In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordancewith any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected orcompromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effectiveprovisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effectiveprovisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions. 11.6 Successors This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of suchParties. 11.7 Survival 11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shallsurvive the expiration or early termination thereof. 11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement. 10 11.8 Waivers Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require thesignatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver bysuch a Party with respect to any similar breach in other circumstances. 11 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first abovewritten. Party A:Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative Party B:Youxin Yishouche (Beijing) Information Technology Co., Ltd.. By:Zhen ZengName:Zhen ZENGTitle:Legal Representative Party C:Beijing Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative Exhibit 4.22 EQUITY INTEREST PLEDGE AGREEMENT This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on _July 20_, 2018 in Beijing, thePeople’s Republic of China (“China” or the “PRC”): Party A: Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. (formerly known as Beijing Fengshun Lubao Network Information TechnologyCo., Ltd.) (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room1632, #1-16, Building 1, No. A6, Jianguomenwai Street, Chaoyang District, Beijing; Party B: Youxin Yishouche (Beijing) Information Technology Co., Ltd. (hereinafter “Pledgor”), a limited liability company organized and existingunder the laws of the PRC, with its address at Room 323602, F36, Building 5, Yard 1, Futong East Street, Chaoyang District, Beijing; and Party C: Beijing Fengshun Lubao Vehicle Auction Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with itsaddress at Room 1416, 14th Floor, Fengkai Wangyuan Technology Incubation Center (Wangyuan Tower), #56 West Fourth Ring South Road,Fengtai District, Beijing. In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the“Parties”. Whereas: 1. Pledgor is a limited liability company who as of the date hereof holds 100% of equity interests of Party C, representing RMB20,000,000in theregistered capital of Party C. Party C is a limited liability company registered in Beijing, China, engaging in consulting and service business. Party Cacknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance inregistering the Pledge; 2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C which is partially owned by Pledgor have executed anExclusive Business Cooperation Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement(as defined below); Pledgor has executed a Power of Attorney (as defined below) in favor of Pledgee; 3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive OptionAgreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest that Pledgor holds in Party C as security for PartyC’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and the Power of Attorney. 1 To perform the provisions of the Transaction Documents (as defined below), the Parties have mutually agreed to execute this Agreement upon thefollowing terms. 1. Definitions Unless otherwise provided herein, the terms below shall have the following meanings: 1.1 Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Section 2 of this Agreement, i.e., the right of Pledgee to bepaid in priority with the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds fromauction or sale of the Equity Interest. 1.2 Equity Interest: shall refer to 100% equity interests in Party C currently held by Pledgor, representing RMB20,000,000 in the registered capitalof Party C, and all of the equity interest hereafter acquired by Pledgor in Party C. 1.3 Term of Pledge: shall refer to the term set forth in Section 3 of this Agreement. 1.4 Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on April 18,2015 (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee and Pledgoron July 20, 2018 (the “Exclusive Option Agreement”), Power of Attorney executed on July 20, 2018 by Pledgor (the “Power of Attorney”) andany modification, amendment and restatement to the aforementioned documents. 1.5 Contract Obligations: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney and thisAgreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and thisAgreement. 1.6 Secured Indebtedness: shall refer to all the direct, indirect and derivative losses and losses of anticipated profits, suffered by Pledgee, incurred asa result of any Event of Default. The amount of such loss shall be calculated in accordance with the reasonable business plan and profit forecastof Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement, all expenses occurred inconnection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligations and etc. 1.7 Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement. 1.8 Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default. 2 2. Pledge 2.1 Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligations and payment of the Secured Indebtednessunder this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement. 2.2 During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividendsdistributed on the Equity Interest only with prior written consent of Pledgee. Dividends received by Pledgor on Equity Interest after deduction ofindividual income tax paid by Pledgor shall be, as required by Pledgee, (1) deposited into an account designated and supervised by Pledgee andused to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or(2) unconditionally donated to Pledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws. 2.3 Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by Pledgor as aresult of Pledgor’s subscription of the increased registered capital of the Company shall also be deemed as Equity Interest. 2.4 In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution orliquidation shall, upon the request of the Pledgee, be (1) deposited into an account designate and supervised by Pledgee and used to secure theContract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally donated toPledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws. 3. Term of Pledge 3.1 The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein is registered with relevantadministration for industry and commerce (the “AIC”). The Pledge shall remain effective until all Contract Obligations have been fullyperformed and all Secured Indebtedness have been fully paid. Pledgor and Party C shall (1) register the Pledge in the shareholders’ register ofParty C within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of thePledge of the Equity Interest contemplated herein within 15 business days following the execution of this Agreement. The parties covenant thatfor the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or anequity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledgehereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of thisAgreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws andregulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible aftersubmission for filing. 3 3.2 During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligations or pay Secured Indebtedness, Pledgeeshall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement. 4. Custody of Records for Equity Interest subject to Pledge 4.1 During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee’s custody the capital contribution certificate for theEquity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. Pledgee shall havecustody of such documents during the entire Term of Pledge set forth in this Agreement. 5. Representations and Warranties of Pledgor and Party C As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that: 5.1 Pledgor is the sole legal and beneficial owner of the Equity Interest. 5.2 Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement. 5.3 Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest. 5.4 Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) forexecution, delivery and performance of this Agreement. 5.5 The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles ofassociation or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it isa party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approvalgranted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions. 6. Covenants of Pledgor and Party C 6.1 During the term of this Agreement, Pledgor and Party C hereby jointly and severally covenant to the Pledgee: 4 6.1.1 Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the EquityInterest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents; 6.1.2 Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within five(5) days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge,shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order orrecommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee’s reasonable requestor upon consent of Pledgee; 6.1.3 Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on the EquityInterest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and otherobligations of Pledgor arising out of this Agreement. 6.1.4 Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expirationof such term to maintain the validity of this Agreement. 6.2 Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted orharmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings. 6.3 To protect or perfect the security interest granted by this Agreement for the Contract Obligations and Secured Indebtedness, Pledgor herebyundertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deedsand/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge toperform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and toenter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons). Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required byPledgee. 6.4 Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under thisAgreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shallindemnify Pledgee for all losses resulting therefrom. 5 7. Event of Breach 7.1 The following circumstances shall be deemed Event of Default: 7.1.1 Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement. 7.1.2 Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement. 7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described inSection 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly. 7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee’s satisfaction within twenty (20) days after thePledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default toPledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions ofSection 8 of this Agreement. 8. Exercise of Pledge 8.1 Pledgee shall issue a written Notice of Default to Pledgor when it exercises the Pledge. 8.2 Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice ofDefault in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interestsassociated with the Equity Interest. 8.3 After Pledgee issues a Notice of Default to Pledgor in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicablePRC laws, the Transaction Documents and this Agreement, including but not limited to being paid in priority with the Equity Interest based onthe monetary valuation that such Equity Interest is converted into or from the proceeds from auction or sale of the Equity Interest. The Pledgeeshall not be liable for any loss incurred by its duly exercise of such rights and powers. 8.4 The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred as result of disposing the Equity Interestand to perform Contract Obligations and pay the Secured Indebtedness to the Pledgee prior and in preference to any other payment. After thepayment of the aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balanceunder applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the extent permitted under applicable PRC laws, Pledgor shall unconditionally donate the aforementioned proceeds to Pledgee or any otherperson designated by Pledgee. 6 8.5 Pledgee may exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to being paid in prioritywith the Equity Interest based on the monetary valuation that such Equity Interest is converted into or from the proceeds from auction or sale ofthe Equity Interest under this Agreement, without exercising any other remedy measure first. 8.6 Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf, and Pledgor or Party C shall not raise anyobjection to such exercise. 8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enablePledgee to enforce the Pledge in accordance with this Agreement. 9. Breach of Agreement 9.1 If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and/orrequire Pledgor or Party C to indemnify all damages; this Section 9 shall not prejudice any other rights of Pledgee herein; 9.2 Pledgor or Party C shall not have any right to terminate this Agreement in any event unless otherwise required by applicable laws. 10. Assignment 10.1 Without Pledgee’s prior written consent, Pledgor and Party C shall not have the right to assign or delegate their rights and obligations under thisAgreement. 10.2 This Agreement shall be binding on Pledgor and his/her successors and permitted assigns, and shall be valid with respect to Pledgee and each ofhis/her successors and assigns. 10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents and this Agreement to its designee(s),in which case the assigns shall have the rights and obligations of Pledgee under the Transaction Documents and this Agreement, as if it were theoriginal party to the Transaction Documents and this Agreement. 10.4 In the event of change of Pledgee due to assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge agreementwith the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC. 7 10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Partieshereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from anyaction/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interestpledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee. 11. Termination 11.1 Upon the fulfillment of all Contract Obligations and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall releasethe Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge fromthe shareholders’ register of Party C and with relevant PRC local administration for industry and commerce. 11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement. 12. Handling Fees and Other Expenses All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any othertaxes and fees, shall be borne by Party C. 13. Confidentiality The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties inconnection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality ofall such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidentialinformation to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’sunauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, ororders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, directors, employees, legalcounsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counselsor financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidentialinformation by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential informationby such Party and such Party shall be held liable for breach of this Agreement. 8 14. Governing Law and Resolution of Disputes 14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereundershall be governed by the laws of China. 14.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute throughfriendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the otherParties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic andTrade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing. Thearbitration award shall be final and binding on all Parties. 14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of anydispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreementand perform their respective obligations under this Agreement. 15. Notices 15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent byregistered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. Aconfirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shallbe determined as follows: 15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date ofdelivery or refusal at the address specified for notices. 15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by anautomatically generated confirmation of transmission). 15.4 For the purpose of notices, the addresses of the Parties are as follows: Party A:Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. Address:Miaopu, #35 Dahuangzhuang, Chaoyang District, BeijingAttn:Xu JingPhone:86 10 80180316Facsimile:86 10 80180396 9 Party B:Youxin Yishouche (Beijing) Information Technology Co., Ltd. Address:Floor 3rd, Building E, Lei Shing Hong Center, No. 8, Guanshun South Street, Chaoyang District, BeijingAttn:Cai NaFacsimile:010-84752441 Party C:Beijing Fengshun Lubao Vehicle Auction Co., Ltd. Address:Miaopu, #35 Dahuangzhuang, Chaoyang District, BeijingAttn:Xu JingPhone:86 10 80180316Facsimile:86 10 80180396 15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof. 16. Severability In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with anylaws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in anyrespect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish tothe greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possibleto the economic effect of those invalid, illegal or unenforceable provisions. 17. Attachments The attachments set forth herein shall be an integral part of this Agreement. 18. Effectiveness 18.1 This Agreement shall become effective upon execution by the Parties. 18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of thegovernmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties. 19. Language and Counterparts This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copyshall be used for registration. The Chinese version and English version shall have equal legal validity. The Remainder of this page is intentionally left blan 10 IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date firstabove written. Party A: Beijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative Party B: Youxin Yishouche (Beijing) Information Technology Co., Ltd. By:Zhen ZENGName:Zhen ZENGTitle:Legal Representative Party C: Beijing Fengshun Lubao Vehicle Auction Co., Ltd. By:Shuo HuangName:Shuo HUANGTitle:Legal Representative  Attachments: 1. Register of Shareholders of Party C; 2. The Capital Contribution Certificate for Party C; 3. Exclusive Business Cooperation Agreement. 4. Exclusive Option Agreement 5. Power of Attorney Exhibit 4.35 Contract No.: Wei Yin (KF-Kai Feng) He Zi 2018 No. 001 AUTO FINANCING BUSINESS COOPERATION AGREEMENT BETWEEN [*] AND KAI FENG FINANCE LEASE (HANGZHOU) CO., LTD. CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSECOMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED. [*] indicates the redacted confidential portions of this exhibit. 1 AUTO FINANCING BUSINESS COOPERATION AGREEMENT Party A: [*]Address: [*]Legal representative: [*]Tel: [*] Party B: Kai Feng Finance Lease (Hangzhou) Co., Ltd. Address: Room 1814, Unit 1, Block 3, Wanda Business Center, Gongshu District, Hangzhou, ZhejiangLegal Representative: Zhen ZengTel: (010) 84752481 Through friendly negotiation, Party A and Party B intend to enter into cooperation in respect of the financing business related to the purchase of vehiclesand/or additional products (services) of vehicles by individual consumers and hereby reach the following terms and conditions. Article 1 Definitions 1.1 “Consumer” shall refer to a domestic natural person requesting for loans from Party A through Party B. 1.2 “Loan Contract” shall refer to the Auto Financing Loan Contract entered into between the Consumer and Party A (the specific name thereof being thename of the contract executed by the Consumer) and supplemental agreements and relevant appendices thereto. 1.3 “Electronic Loan Receipt” shall refer to the electronic document showing to the Consumer such elements of the loan as the borrower, lender, amountof loan, term of loan, interest rate of loan, repayment amount, repayment date and collateral. 1.4 “Financial Lease Contract” shall refer to the Financial Lease Contract entered into between the Consumer and Party B (the specific name thereof beingthe name of the contract executed by the Consumer) and supplemental agreements and relevant appendices thereto. 1.5 “Service Agreement” shall refer to the Auto Financing Service Agreement entered into between Party A and Party B (the specific name thereof beingthe name of the agreement executed by both parties) and supplemental agreements and relevant appendices thereto. 2 Article 2 Model of Cooperation 2.1 The Consumer will sell the vehicle purchased and owned by him/her to Party B and then lease back such vehicle for use and make the financial leasepayment in installments to Party B. During the term of lease, the title of the vehicle will be registered under the name of the Consumer or such holderas designated by the Consumer. 2.2 Upon Party B’s recommendation, the Consumer will request for a loan from Party A through Party B, for repaying the financial lease payment owed toParty B. 2.3 Party B will provide the agreed offline service to Party A, receive relevant service fees and provide guarantee in relation to such loan in accordancewith the Service Agreement. Article 3 Term of Cooperation 3.1 This Agreement shall apply to all transactions under which individual loans are disbursed between June 28, 2018 and June 27, 2020(inclusive). Upon the expiry of such term of cooperation, the term of cooperation hereunder shall be extended for one year automatically and shallonly be extended once if no written notice is received from either party to terminate the cooperation upon expiry of the term thereof. 3.2 Upon the expiry of the term of cooperation, the outstanding loans payable by Consumers in connection with the cooperation hereunder are stillsubject to this Agreement and this Agreement shall remain effective until all outstanding loans are paid up by the Consumers. Article 4 Rights and Duties of the Parties 4.1 Rights and Duties of Party A 4.1.1 Party A shall develop risk management policies, including without limitation the credit admittance policy, examination and approval conditions andpost-loan management strategies. 4.1.2 Party A shall review Party B’s management regulations and operation procedures in connection with the cooperation hereunder. 4.1.3 Party A shall be responsible for examination and approval for loans, including without limitation screening of fraud risks, determination of creditadmittance 3 and examination of loan purpose. 4.1.4 Party A shall disburse loans to Consumers who are eligible for loans and satisfy the conditions for disbursement of loans, unless it is unable to disburseloans due to such reasons as requirements of laws and regulations, regulatory policies, risk policies, quota, system malfunction, or waiver by theConsumers. 4.1.5 Party A shall manage the loans in their duration, including without limitation the post-loan monitoring, risk classification, allocation of provisions,capital occupation and asset recovery. 4.1.6 Party A shall be responsible for inquiries on Consumers’ credit standing and submit credit data to the Credit Center of the People’s Bank of China(PBC) in accordance with relevant regulations. 4.1.7 In case of a breach by Party B, Party A shall have the right to change the model of cooperation, products under cooperation, risk management policiesand provisions on pledge over the deposit. 4.2 Rights and Duties of Party B 4.2.1 Party B shall provide relevant service to Party A and receive service fees in accordance with the Service Agreement between both parties. 4.2.2 Party B shall, in relevant terms of the Financial Lease Contract entered into with the Consumer, express the intention that “if the Consumer uses theloan to repay the financial lease payment, the title of the vehicle shall be transferred to the Consumer”. Subject to the foregoing, Party B may agreewith the Consumer on the rights and interests in and to the vehicle in the Financial Lease Contract, unless otherwise specified herein. 4.2.3 Party B shall carry out transactions under the cooperation hereunder in its own name. If it carries out transactions in other names (including withoutlimitation Party B’s branches, subsidiaries, affiliates or other authorized third parties), it shall obtain Party A’s prior written consent and complete therelevant legal procedures. 4.2.4 If Party B and/or its affiliates make any plan which may affect Party B’s operational ability and transactions under cooperation, including withoutlimitation change of corporate structure, change of business model, change of product forms, execution or modification of agreements which mayaffect the cooperation hereunder or Party A’s interests, etc., Party B shall notify Party A in writing at least [*] working days prior to the implementationof such plan. 4 4.2.5 If any event occurs to Party B and/or its affiliates which may affect Party B’s operational ability and transactions under cooperation, including withoutlimitation a material adverse change in its operational status, high-amount fines being imposed by competent authorities, major legal disputes,ultimate controller and major management personnel being involved in negative events (including litigation), etc., Party B shall notify Party A inwriting within [*] working days after the occurrence of such event. 4.2.6 Party B shall provide deposit as security and use the vehicle as collateral in favor of Party A to secure the Consumer’s debts in accordance with thisAgreement. 4.3 Rights and Duties of Both Parties 4.3.1 Both parties shall jointly negotiate for and properly adjust such matters as the model of cooperation and term of cooperation. 4.3.2 Both parties shall jointly resolve the disputes and controversies with Consumers and issue relevant certifications concerning the Consumers. 4.3.3 Both parties shall jointly improve the channel management, business process, risk control and system functions. 4.3.4 Both parties shall use the corporate and product marks in such manner as agreed between both parties through negotiation during the term ofcooperation. Article 5 Account Management 5.1 Party B shall open a settlement account at Party A, with the account number of [*], which will be mainly used for settlements for thetransactions under the cooperation hereunder. Party B shall give close attention to and maintain the adequacy of funds in such account. This accountwill be used for the following purposes: 5.1.1 to pay the deposit: to authorize Party A to deduct and transfer relevant amount to the deposit account in accordance with this Agreement; 5.1.2 to pay other amounts: to pay other relevant amounts payable in accordance with this Agreement and the Service Agreement; 5.1.3 to receive the loan proceeds: to receive the loan proceeds disbursed by Party A to Consumers in accordance with this Agreement; 5.1.4 to receive the service fees: to receive the service fees paid by Party A to Party B 5 in accordance with this Agreement; 5.1.5 to receive interest accrued on the accounts: to receive interest remitted from the escrow account and deposit account; and 5.1.6 to receive remittances: to receive remittances from the escrow account and deposit account. 5.2 Party B shall open an escrow account at Party A, with the account number of [*]. The funds in the escrow account will be managed by Party Aand shall not be remitted or drawn by Party B without authorization. This account will be used for the following purposes: 5.2.1 to receive the loan proceeds: to receive the loan proceeds disbursed by Party A to the Consumers in accordance with this Agreement; 5.2.2 to receive other escrow amounts: to receive other escrow amounts as agreed upon between both parties; and 5.2.3 [*] 5.3 Party B shall open a deposit account with Party A, with the account number of [*]. This account will be used for the following purposes: 5.3.1 to retain the deposit: to retain the deposit in accordance with this Agreement; and 5.3.2 [*] Article 6 Disbursement of Loan 6.1 If the Consumer passes Party A’s review and satisfies the conditions for disbursement of the loan, Party A will disburse the loan proceeds toParty B’s escrow account in accordance with the Loan Contract and the provisions on entrusted payment, and meanwhile remit [*%] of the loanproceeds from the escrow account to the settlement account. 6.2 Party B shall duly complete the registration of vehicle mortgage within the stipulated term in accordance with the Service Agreement andprovide Party A with photocopies of the Vehicle Registration Certificate carrying information on the registered mortgage rights as required by Party A.Upon receipt of the qualified photocopies, Party A will remit the remaining [*%] of the loan proceeds from the escrow account to the settlementaccount. 6 6.3 If Party B fails to complete the registration of vehicle mortgage or provide relevant photocopies within [*] calendar days (inclusive) afterdisbursement of the loan, Party A will make deductions from Party B’s settlement account to the escrow account, until the amount in the escrowaccount is not less than [*%] of the disbursed amount of the loan. 6.4 Thereafter, if Party B completes the registration of vehicle mortgage and provides relevant photocopies within [*] calendar days (inclusive)after disbursement of the loan, Party A will release relevant amount of the loan from the escrow account to the settlement account periodically. 6.5 If Party B still fails to complete the registration of vehicle mortgage or provide relevant photocopies within [*] calendar days (inclusive) afterdisbursement of the loan, Party A will declare that the loan is due immediately and require Party B to repay such loan on behalf of the Consumer. PartyB irrevocably authorizes Party A to deduct the outstanding amount of the loan from the escrow account, and the balance, if any, remaining in theescrow account will be transferred to the settlement account. Article 7 Repayment and Interest Payment 7.1 Party A and Party B will remind and procure the Consumer to repay the principal of the loan and pay interest on the loan on schedule in thestipulated manner and to the stipulated account in accordance with the elements of loan as recorded on the Electronic Loan Receipt. For different types of products/loans under the cooperation between Party A and Party B, the interest rates vary as follows: Type of product/loanAnnualized interest rateLoan for final payment for “pay half” products withmonthly repayments[*%] Loan for installment payments for “pay half” products withmonthly repayments[*%] 7.2 If necessary, the Consumer is permitted to prepay the loan upon the stipulated conditions, until the principal of and interest on the loan havebeen fully paid. 7 7.3 If the Consumer fails to fully repay the principal and interest owed on the relevant repayment date, Party A shall have the right, from theoverdue date, to calculate default interest on the overdue amount based on the number of overdue days at a rate which is [*%] higher than the interestrate recorded in the Electronic Loan Receipt. 7.4 The collection and disposal process agreed between both parties will be applicable for overdue loans. Article 8 Service Fee and Other Fees 8.1 The fees of data inquiry and data lines incurred for the cooperation hereunder shall be borne by both parties as follows: 8.1.1 Credit information query fees charged by PBC and public security governmental departments, as well as data line expenses charged by PBC and theMinistry of Public Security shall be borne by Party A. 8.1.2 Other credit information query fees as well as the data line expenses charged by data providers shall be borne by Party B. 8.1.3 In respective of relevant fees incurred from rent of data line from operators for purpose of data sharing and system direct connection, Party B shouldbear the cost for one main line and Party A shall bear the cost for one backup line. 8.2 Other than the aforesaid, neither party may charge the other for transaction fees or any other fees in connection with the system interconnection,unless otherwise agreed upon between both parties. 8.3 Technical Service Fee 8.3.1 Party A will provide technical service for automatic settlement of escrow amounts for Party B. If the Consumer passes Party A’s review and satisfies theconditions for disbursement of the loan, Party A will disburse the loan proceeds to Party B’s escrow account in accordance with the Loan Contract andthe provisions on entrusted payment, and Party B authorizes Party A to automatically remit [*%] of the loan proceeds in the escrow account (the“Amount of Automatic Settlement”) to Party B’s settlement account through the automatic settlement function. The remaining [*%] of the loanproceeds in the escrow account (the “Amount of Settlement upon Approval”) will be remitted in accordance with this Agreement upon approval byParty A. 8.3.2 Party A has the right to charge the technical service fee for the technical service 8 for automatic settlement of escrow amounts on the basis of the Amount of Automatic Settlement and at a rate of [*%] per day, for the following period:[*]. 8.3.3 Party A has the right to deduct such amount of technical service fee as specified in Clause 8.3.2 from Party B’s settlement account upon the expiry ofthe period of charging. 8.3.4 Upon receipt of the technical service fee paid by Party B, Party A shall issue the invoice satisfying the requirements of Party B’s finance departmentfor the corresponding period of the underlying transaction (on a monthly basis) and mail the invoice to Party B within the first [*] working days of thenext month. Article 9 Pledge over the Deposit 9.1 Party B will open a deposit account with Party A for payment and release of the deposit as follows: Party B irrevocably authorizes Party A to, before the disbursement of each loan, deduct an amount not less than [*%] of the disbursed amount of theloan from Party B’s settlement account and remit that amount to the deposit account. Party A will periodically release the balance of the deposit, ifany, after the full repayment of the loan and Party A’s exercise of the priority of compensation against the deposit. 9.2 The aforesaid amount will be deemed specialized and delivered to Party A when paid into the deposit account, and the pledge over suchamount will become effective to secure all debts owed by the Consumer hereunder, including without limitation the principal of the loan, interest anddefault interest on the loan, and other relevant fees. 9.3 If Party B fails to pay the deposit in full and on schedule, Party A shall have the right not to enter into new transactions under the cooperation. 9.4 If the Consumer fails to repay the loan or pay the interest on the due date, Party A shall have the priority to be compensated from the depositremaining in the deposit account. Article 10 Mortgage over the Vehicle 10.1 The Consumer and Party B will enter into the Financial Lease Contract to effect the mortgage registration with Party B as the mortgagee. 10.2 After Party A disburses the loan to the Consumer for repaying the financial 9 lease payment under the Financial Lease Contract, the Consumer shall acquire the title of the vehicle under such Financial Lease Contract and will, inaccordance with the Loan Contract entered into with Party A, use the vehicle as collateral in favor of Party A to secure the debts owed under the LoanContract. 10.2.1 Party A has the right not to go through the registration of vehicle mortgage immediately and to require cancellation of the registration with Party Bas the mortgagee at any time. 10.2.2 Party A has the right to go through the registration of vehicle mortgage with Party A and/or the third party designated by Party A as the mortgagee,in which Party B shall unconditionally provide assistance. 10.3 In the duration of the loan, without Party A’s written consent, Party B and the Consumer shall not cancel the registration of collateral with PartyB as the mortgagee, or transfer, sell, auction, create new mortgage over the vehicle or take other acts that may affect Party A’s mortgage rights. 10.4 Party B is responsible for keeping the original of the Vehicle Registration Certificate until full repayment of the loan. 10.5 The proceeds from the transfer, auction or sale of the vehicle in enforcing the mortgage over the vehicle by Party A or by Party B on behalf ofParty A shall first be used to repay the principal of the loan, the interest and default interest on the loan and other relevant fees owed by the Consumerto Party A, and Party B shall not challenge Party A’s priority of compensation on any ground. 10.6 If Party B makes other arrangements which renders it impossible to give effect to the provisions of Clauses 4.2.2 and 10.2 hereof, Party B shallagree that: (1) the balance of creditor’s claim corresponding to the mortgage registration with Party B as the mortgagee under the Financial LeaseContract shall be RMB [*]; and (2) the vehicle shall be mortgaged in favor of Party A to secure the loan under this Agreement, which shall cover theprincipal of such loan, interest and default interest on such loan and other fees, and the information on the collateral shall be consistent with thatrecorded on the related Electronic Loan Receipt. Article 11 Information Security and Data Sharing 11.1 As permitted by applicable laws, the data of the cooperation hereunder should be stored in the host system of Party A and Party B. Each partyshall take the confidentiality and security measures on the financial data stored and managed by it in accordance with the regulatory and compliancerequirements. 10 11.2 Party A and Party B shall take effective technical measures to safeguard the Consumer information and protect the rights of Consumers, andshall formulate specific rules related to information security, Consumer rights protection, accident treatment and compensation liabilities. 11.3 In the event of the occurrence of an IT emergency as defined by the regulatory body or an emergency that may trigger systemic or regional ITrisks, the knowing party shall promptly inform the other, including the impact, disposal and corrective measures of such incident. 11.4 Both parties will share external credit data obtained from governmental authorities and the market that is authorized by the Consumer and isconsistent with relevant legal requirements. The credit information shall not be disclosed to institutions other than the parties to the cooperation andshall not be used for illegal purposes. 11.5 Party A and Party B shall provide each other with relevant data in connection with the cooperation hereunder through the systeminterconnection, including vehicle transaction information, client approval information, risk review results, contracts and agreements, loandisbursement information and repayment information. 11.6 Without the written consent of Party A, Party B shall not use any PBC credit information (including but not limited to PBC variables and PBCratings) obtained by Party A during the cooperation hereunder and the results generated by Party A based on various risk models and rules, and shallnot use such data to assist with other business of Party B or its affiliates. 11.7 Party B shall regularly (at least on a quarterly basis) submit to Party A information concerning Party B and Party B’s affiliates controlled by theultimate controller of Party B, including without limitation the financial statements, audit reports, financial details, tax data, equity structure,financing information, receipts of financing and assets operation data, and shall guarantee the authenticity, integrity and effectiveness of suchinformation, for Party A to evaluate Party B’s operating ability in a timely manner. 11.8 Party B shall on a monthly basis submit to Party A overall operational data related to auto financing of Party B and Party B’s affiliates,including without limitation the business model, product forms, amount of disbursements, balance under the cooperation, data on overdue payments,changes in organizational structure, changes in market channels, etc., to facilitate the in-depth cooperation between both parties in the field of autofinancing. 11 Article 12 Confidentiality 12.1 Each party shall keep strict confidential of any materials (whether related to technical or commercial) of any form that are received by it due toexecution of this Agreement which belong to the other party or are in relating to the following event (or any other agreement entered into under thisAgreement) and shall not use or disclose such information to any third party other than the regulatory authority: (1) The cooperation hereunder; (2) Any negotiations conducted in relation to the cooperation hereunder; (3) Relevant credit information, Consumer information and transaction information provided based on the cooperation hereunder; (4) Business, financial and other matters (including future plans and targets) of other Parties. 12.2 This confidentiality clause shall not prohibit the disclosure or use of confidential information in the following scope and in the followingmanner: (1) Disclosure or use of confidential information according to the regulations or requirements of the supervisory authority of each Party; (2) Disclosure or use of confidential information as required in any judicial, arbitral or other proceedings in connection with this Agreement orany other agreement entered into according to this Agreement; 12.3 The confidentiality obligation shall persist from the date of execution of this Agreement to the date of publication or disclosure of the same aspermitted by the disclosing party, and shall survive the expiry of this Agreement. Article 13 Default 13.1 Any Party shall be deemed to commit a default under any of the following circumstances (hereinafter referred to as “Event of Default”): (1) The defaulting party breaches any of the provisions of this Agreement, and such breach cannot be rectified or the defaulting party fails torectify the breach within [*] calendar days after the non-defaulting delivers a written rectification notice; (2) The defaulting party violates any applicable law, which violation will directly affect this Agreement or cause losses to the other party; (3) The defaulting party violates other contracts executed with Party A (including but not limited to credit contract, loan contract) andsupplementary agreement. 12 13.2 Default Notice 13.2.1 Upon any Event of Default, the defaulting party shall as soon as practicable but in no event (other than the effect of force majeure) later than [*]calendar days after becoming aware of the event, notify the non-defaulting party. 13.2.2 Upon any Event of Default, without prejudice to the non-defaulting party’s right to claim for damages, the non-defaulting party may, within [*]calendar days after the receipt of default notice from defaulting party or after it becomes aware of the occurrence of the event of default (whichever isearlier), elect to continue performing this Agreement or terminate the cooperation hereunder by sending a written notice to the defaulting party. 13.2.3 This Agreement shall terminate immediately upon receipt by the defaulting party of a notice of termination. 13.2.4 Losses and liquidated damages for default (1) The non-defaulting Party shall be entitled to ask the breaching Party to exclude the adverse effects on it; (2) The non-defaulting Party shall be entitled to suspend or terminate the cooperation hereunder; (3) The defaulting party shall compensate the non-defaulting party for all direct losses incurred or resulted in an Event of Default attributed bythe defaulting party. (4) The defaulting party shall compensate the non-defaulting party for the losses incurred due to misoperation of the defaulting party(including but not limited to system misoperation, operational failures, etc.). Article 14 Cooperation Termination 14.1 Under any of the following events, either party shall have the right to unilaterally terminate the cooperation hereunder: (1) The policies of the regulatory authorities of any Party (including but not limited to the China Banking Regulatory Commission, PBC andtheir branches) have undergone major changes that will significantly affect the cooperation hereunder or such authorities has issued writtenrequest to cease the cooperation hereunder: (2) Any new applicable law or regulatory documents are promulgated by government or regulatory authorities, or the existing applicable law orregulatory documents are revised or interpreted in a new way, which render it impossible to carry out the cooperation hereunder or render itimpossible for a party to obtain all of its benefits under any important terms hereunder in accordance with such terms; 13 (3) Any Party undergoes material adverse changes, which render it impossible to continue to perform this Agreement as or cause significantdamages to the parties; (4) If any Event of Default occurs, the non-defaulting Party may request the termination of the cooperation hereunder. 14.2 Unless otherwise agreed in this Agreement, the cooperation hereunder will terminate upon the expiry of the cooperation term herein. Article 15 Miscellaneous 15.1 If Party A intends to sell or transfer the Consumer loan under this Agreement (assets spin-off), Party B shall provide reasonable assistance, includingbut not limited to sign necessary documents/undertakings/notifications. 15.2 Any matters uncovered herein shall be subject to separate negotiations between the Parties, with respect to which a supplementary agreement shouldbe signed, and shall be performed in accordance with this Agreement and the supplementary agreement. 15.3 All Schedules and supplemental agreement of this Agreement are integral parts of this Agreement. 15.4 Any dispute that may arise during the performance of this Agreement between the Parties shall be settled through negotiations by all parties. If thenegotiations fail, the dispute may be submitted to the people’s court where Party A is located. 15.5 The execution, interpretation and disputes resolution of this Agreement is governed by the law of People’s Republic of China. 15.6 This Agreement shall be signed on the signing date by the legal representative or authorized signatory of both parties, and shall enter into force afterbeing signed (or stamped signature seal) by the legal representative or authorized signatory of both parties and stamped with an official/contract seal. 15.7 The Agreement shall be executed in quadruplicate, with each party holding two pieces. Each piece shall be equally valid. (The Reminder of this page is intentionally left blank.) 14 (This page has no text and is the signature page of this Agreement.) Party A (Seal): Legal Representative or Authorized Agent (Signature): Date of execution: Party B (Seal): Legal Representative or Authorized Agent (Signature): Date of execution: 15 Contract No.: Wei Yin (KF-Kai Feng) He Bu Zi 2018 No. 001 SUPPLEMENTAL AGREEMENT I TO AUTO FINANCING BUSINESS COOPERATION AGREEMENT 1 Party A: [*]Address (address): [*]Legal representative (person in charge): [*]Tel: [*] Party B: Kai Feng Finance Lease (Hangzhou) Co., Ltd.Address (address): Room 1814, Unit 1, Block 3, Wanda Business Center, Gongshu District, Hangzhou, ZhejiangLegal Representative (person in charge): Zhen ZengTel: (010) 84752481 Whereas, Party A and Party B entered into the Auto Financing Business Cooperation Agreement with the number of Wei Yin (KF-Kai Feng) Zi 2018 No. 001(the “Cooperation Agreement”) in 2018, whereby both parties carry out cooperation in respect of the financing business related to the purchase of vehiclesand/or additional products (services) of vehicles by individual consumers. Now, therefore, through friendly negotiation, Party A and Party B intend to amendcertain terms of the Cooperation Agreement (including all supplemental agreements thereto entered into between both parties before execution of thisSupplemental Agreement) and hereby enter into this Supplemental Agreement for mutual adherence. 1. The percentage of deposit to be deducted will be changed as follows: Party B irrevocably authorizes Party A to, before the disbursement of each loan, deduct an amount equal to [*%] of the disbursed amount of the loan fromParty B’s settlement account and remit that amount to the deposit account. Party A will periodically release the balance of the deposit, if any, after the fullrepayment of the loan and Party A’s exercise of the priority of compensation against the deposit. 2. From the date of execution and effectiveness of this Supplemental Agreement, the following terms will apply to vehicle mortgage inrelation to the vehicle financing transactions with the Consumers under the Cooperation Agreement: 2.1 As for vehicle mortgage in relation to the vehicle financing transactions with the Consumers within the scope confirmed by both parties,Party B shall go through the registration of vehicle mortgage under the Auto Financing Loan Contract with Party A and/or the third party designatedby Party A as the mortgagee in accordance with Party A’s requirements and the Service Agreement; and for those transactions, the mortgageregistration under the Financial Lease Contract with Party B as the mortgagee will not be dealt with first and such transactions will not be bound byClause 4.2.2 of the Cooperation Agreement. 2 Both parties will update the specific “scope confirmed by both parties” from time to time. As for the aforesaid vehicle financing transactions with the Consumer, the proceeds from the transfer, auction or sale of the vehicle in enforcing themortgagee over the vehicle by Party B on behalf of Party A shall first be used to repay the principal of the loan, the interest and default interest onthe loan and other relevant fees owed by the Consumer to Party A, and Party B shall not challenge Party A’s priority of compensation on any ground. 2.2 As for vehicle mortgage in relation to the vehicle financing transactions with the Consumers not covered by the scope specified in Clause2.1 above, Article 10 of the Cooperation Agreement shall still apply. 3. If Party B requests for materials from Party A as required by lawsuits with the Consumer due to the cooperation, Party A shall provide therequired materials within [*] working days (including without limitation certification on validity of electronic contracts and documents such as theLoan Contract, loan disbursement records, etc.). After Party B makes repayment or compensation on behalf of the Consumer, Party B willautomatically be entitled to all creditor’s claims, mortgagee’s rights and other collateral rights under the Loan Contract and relevant mortgagecontract as well as insurance interests, other benefits and proceeds against the Consumer in lieu of Party A. If Party A receives any amount repaid bythe Consumer which should be paid to Party B, it shall pay such amount to Party B within [*] working days of the receipt thereof. After Party Bmakes repayment or compensation on behalf of the Consumer, Party A shall provide proactive assistance for Party B in all respects for final recoveryof debts (including without limitation issuing the transfer notice to the Consumer upon Party B’s request). 4. If Party A entrusts Party B to recover the debts or enforce the mortgage over the vehicle, it shall issue the relevant power of attorney asrequired by Party B. 5. In the duration of the loan owed by the Consumer, if vehicle robbery and theft is confirmed by the public security organ, Party A shall havethe right to require Party B to repay the outstanding principal of and interest and default interest on the loan (excluding compound interest,liquidated damages and other fees) on behalf of the Consumer. 6. If Party A and other partner financial institutions jointly provide the loan under the Cooperation Agreement for the Consumer, any lendershall have the equal rights and interests as Party A, and Party B shall not challenge its 3 obligations hereunder on this ground. 7. This Supplemental Agreement shall apply to all loans requested by Consumers under the cooperation between Party A and Party B fromand after October 19, 2018, and the outstanding loans under the Cooperation Agreement shall still be governed by the terms of the CooperationAgreement until full repayment of all outstanding loans. 8. This Supplemental Agreement shall be an integral part of and have the equal legal force and effect as the Cooperation Agreement. In case ofany conflict between the Cooperation Agreement and this Supplemental Agreement, this Supplemental Agreement shall prevail; matters not coveredby this Supplemental Agreement shall be governed by the Cooperation Agreement. 9. This Supplemental Agreement shall enter into force after being signed or stamped by the legal representatives or authorized attorneys ofParty A and Party B and affixed with their official seals/contract seals and shall remain effective within the effective term of the CooperationAgreement. 10. This Supplemental Agreement shall be made in four (4) counterparts, with Party A and Party B each holding two (2), and each counterpartshall have the equal legal force and effect. (The remainder of this page is intentionally left blank) 4 Party A (seal): Legal representative (person in charge) or authorized attorney (signature/seal): Date of execution: Party B (seal): Legal representative or authorized attorney (signature/seal): Date of execution: 5 Confirmation To[*], We, as the guarantor, are aware of and understand the Auto Financing Business Cooperation Agreement with the number of Wei Yin (KF-Kai Feng) He Zi2018 No. 001 entered into between Kai Feng Finance Lease (Hangzhou) Co., Ltd. and your bank and the aforesaid Supplemental Agreement, and undertaketo perform the Auto Financing Guarantee Contract with the number of Wei Yin (KF-Kai Feng) He Zi 2018 No. 001 between your bank and us. Confirmed by: Youqin (Shaanxi) Finance Lease Co., Ltd. (seal) Date: Confirmed by: Yougu (Shanghai) Information Technology Co., Ltd. (seal) Date: Confirmed by: Youzhen (Beijing) Business Consulting Co., Ltd. (seal) Date: Confirmed by: Yousan (Shanghai) Used Car Operating Co., Limited (seal) Date: Confirmed by: Youfang (Beijing) Information Technology Co., Ltd. (seal) Date: Confirmed by: Shenzhen Youxin Pengda Second Hand Car Brokerage Co., Ltd. (seal) Date: Confirmed by: Youxinpai (Beijing) Information Technology Co., Ltd. (seal) Date: 6 Contract No.: Wei Yin (KF-Kai Feng) He Bu Zi 2018 No. 002 SUPPLEMENTAL AGREEMENT II TO AUTO FINANCING BUSINESS COOPERATION AGREEMENT 1 Party A: [*]Address (address): [*]Legal representative (person in charge): [*]Tel: [*] Party B: Kai Feng Finance Lease (Hangzhou) Co., Ltd.Address (address): Room 1814, Unit 1, Block 3, Wanda Business Center, Gongshu District, Hangzhou, ZhejiangLegal Representative (person in charge): Zhen ZengTel: (010) 84752481 Whereas, Party A and Party B entered into the Auto Financing Business Cooperation Agreement with the number of Wei Yin (KF-Kai Feng) Zi 2018 No. 001(the “Cooperation Agreement”) in 2018, whereby both parties carry out cooperation in respect of the financing business related to the purchase of vehiclesand/or additional products (services) of vehicles by individual consumers. Now, therefore, through friendly negotiation, Party A and Party B intend to amendcertain terms of the Cooperation Agreement (including all supplemental agreements thereto entered into between both parties before execution of thisSupplemental Agreement) and hereby enter into this Supplemental Agreement for mutual adherence. 1. Clauses 6.1 and 6.2 of the Cooperation Agreement will be changed as follows: “6.1 If the Consumer passes Party A’s review and satisfies the conditions for disbursement of the loan, Party A will disburse the loan proceeds to Party B’sescrow account in accordance with the Loan Contract and the provisions on entrusted payment, and meanwhile remit [*%] of the loan proceeds from theescrow account to the settlement account. 6.2 Party B shall duly complete the registration of vehicle mortgage within the stipulated term in accordance with the Service Agreement and provide Party Awith photocopies of the Vehicle Registration Certificate carrying information on the registered mortgage rights as required by Party A.” 2. Clause 8.3 of the Cooperation Agreement will be changed as follows: “8.3.1 Party A will provide technical service for automatic settlement of escrow amounts for Party B. If the Consumer passes Party A’s review and satisfies theconditions for disbursement of the loan, Party A will disburse the loan proceeds to Party B’s escrow account in accordance with the Loan Contract and theprovisions on entrusted payment, and Party B authorizes Party A to automatically remit [*%] of the 2 loan proceeds in the escrow account (the “Amount of Automatic Settlement”) to Party B’s settlement account through the automatic settlement function. 8.3.2 Party A has the right to charge the technical service fee for the technical service for automatic settlement of escrow amounts on the basis of the Amountof Automatic Settlement and at a rate of [*%] per day, for the following period: [*]. 8.3.3 Party A has the right to deduct such amount of technical service fee as specified in Clause 8.3.2 from Party B’s settlement account upon the expiry ofthe period of charging. 8.3.4 Upon receipt of the technical service fee paid by Party B, Party A shall issue the invoice satisfying the requirements of Party B’s finance department forthe corresponding period of the underlying transaction (on a monthly basis) and mail the invoice to Party B within the first [*] working days of the nextmonth.” 3. This Supplemental Agreement shall apply to all loans requested by Consumers under the cooperation between Party A and Party B from andafter December 7, 2018, and the outstanding loans under the Cooperation Agreement shall still be governed by the terms of the CooperationAgreement until full repayment of all outstanding loans. 4. This Supplemental Agreement shall be an integral part of and have the equal legal force and effect as the Cooperation Agreement. In case ofany conflict between the Cooperation Agreement and this Supplemental Agreement, this Supplemental Agreement shall prevail; matters not coveredby this Supplemental Agreement shall be governed by the Cooperation Agreement. 5. This Supplemental Agreement shall enter into force after being signed or stamped by the legal representatives or authorized attorneys of PartyA and Party B and affixed with their official seals/contract seals and shall remain effective within the effective term of the Cooperation Agreement. 6. This Supplemental Agreement shall be made in four (4) counterparts, with Party A and Party B each holding two (2), and each counterpart shallhave the equal legal force and effect. (The remainder of this page is intentionally left blank) 3 (Signature page) Party A (seal): Legal representative (person in charge) or authorized attorney (signature/seal): Date of execution: Party B (seal): Legal representative or authorized attorney (signature/seal): Date of execution: 4 Confirmation To[*], We, as the guarantor, are aware of and understand the Auto Financing Business Cooperation Agreement with the number of Wei Yin (KF-Kai Feng) He Zi2018 No. 001 entered into between Kai Feng Finance Lease (Hangzhou) Co., Ltd. and your bank and the aforesaid Supplemental Agreement, and undertaketo perform the Auto Financing Guarantee Contract with the number of Wei Yin (KF-Kai Feng) He Zi 2018 No. 001 between your bank and us. Confirmed by: Youqin (Shaanxi) Finance Lease Co., Ltd. (seal) Date: Confirmed by: Yougu (Shanghai) Information Technology Co., Ltd. (seal) Date: Confirmed by: Youzhen (Beijing) Business Consulting Co., Ltd. (seal) Date: Confirmed by: Yousan (Shanghai) Used Car Operating Co., Limited (seal) Date: Confirmed by: Youfang (Beijing) Information Technology Co., Ltd. (seal) Date: Confirmed by: Shenzhen Youxin Pengda Second Hand Car Brokerage Co., Ltd. (seal) Date: Confirmed by: Youxinpai (Beijing) Information Technology Co., Ltd. (seal) Date: 5 EXHIBIT 8.1 List of Principal Subsidiaries and Consolidated Affiliated Entities Place of Incorporation Subsidiaries:Perfect Harmony Group LimitedCayman IslandsFairlubo Auction Company LimitedCayman IslandsUxin Used Car LimitedCayman IslandsUcarEase Holding LimitedBritish Virgin IslandsUcarBuy Holding LimitedBritish Virgin IslandsUxin Hong Kong LimitedHong KongFairlubo Auction HK Company LimitedHong KongUcarShow HK LimitedHong KongGloryFin International Group Holding Company LimitedHong KongUcarBuy HK LimitedHong KongYouxinpai (Beijing) Information Technology Co., Ltd.PRCYouhan (Shanghai) Information Technology Co., Ltd.PRCBeijing Youxin Fengshun Lubao Vehicle Auction Co., Ltd.PRCYougu (Shanghai) Information Technology Co., Ltd.PRCYouzhen (Beijing) Business Consulting Co., Ltd.PRCKai Feng Finance Lease (Hangzhou) Co., Ltd.PRCYouqin (Shanxi) Finance Lease Co., Ltd.PRCBoyu Finance Lease (Tianjin) Co., Ltd.PRCYouxin (Shanghai) Used Car Business Co., Ltd.PRC Baogu Automobile Technology Services (Beijing) Co., Ltd. (“Baogu”)PRC Consolidated affiliated entities:Youxin Internet (Beijing) Information Technology Co., Ltd.PRCBeijing Fengshun Lubao Vehicle Auction Co., Ltd.PRCYouxin Yishouche (Beijing) Information Technology Co., Ltd.PRCChebole (Beijing) Information Technology Co., Ltd.PRCZhejiang Dongwang Internet Technology CO., Ltd.(“Dongwang”)PRC EXHIBIT 12.1 Certification by the Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Kun Dai, certify that: 1. I have reviewed this annual report on Form 20-F of Uxin Limited (the “Company”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) [intentionally omitted] (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internalcontrol over financial reporting. Date:April 29, 2019 By:/s/ Kun DaiName:Kun DaiTitle:Chief Executive Officer EXHIBIT 12.2 Certification by the Principal Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Zhen Zeng, certify that: 1. I have reviewed this annual report on Form 20-F of Uxin Limited (the “Company”); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) [intentionally omitted] (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered bythe annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internalcontrol over financial reporting. Date:April 29, 2019 By:/s/ Zhen ZengName:Zhen ZengTitle:Chief Financial Officer EXHIBIT 13.1 Certification by the Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Uxin Limited (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Kun Dai, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:April 29, 2019 By:/s/ Kun DaiName:Kun DaiTitle:Chief Executive Officer EXHIBIT 13.2 Certification by the Principal Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Uxin Limited (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Zhen Zeng, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date:April 29, 2019 By:/s/ Zhen ZengName:Zhen ZengTitle:Chief Financial Officer EXHIBIT 15.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-227576) of Uxin Limited of our report datedApril 29, 2019 relating to the financial statements, which appears in this annual report on Form 20-F. /s/ PricewaterhouseCoopers Zhong Tian LLPPricewaterhouseCoopers Zhong Tian LLPShanghai, the People’s Republic of ChinaApril 29, 2019 EXHIBIT 15.2 April 29, 2019 Uxin Limited.2-5/F, Tower E, LSHM Center,No. 8 Guangshun South Avenue,Chaoyang District,Beijing, 100102People’s Republic of China Dear Sir/Madam: We hereby consent to the reference of our name under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure”and “Item 4. Information on the Company—C. Organizational Structure” in Uxin Limited’s Annual Report on Form 20-F for the year ended December 31,2018 (the “Annual Report”), which will be filed with the Securities and Exchange Commission (the “SEC”) on the date hereof, and further consent to theincorporation by reference into the Registration Statement on Form S-8 (No. 333-227576) pertaining to Uxin Limited’s 2018 Amended and Restated ShareIncentive Plan of the summary of our opinion under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure” and“Item 4. Information on the Company—C. Organizational Structure” in the Annual Report. We also consent to the filing of this consent letter with the SEC asan exhibit to the Annual Report. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Actof 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder. Very truly yours, /s/ JunHe LLP JunHe LLP 

Continue reading text version or see original annual report in PDF format above