Ladies and gentlemen, thank you for standing by and welcome to Uxin's fourth quarter and full year 2018 earnings conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Nancy Song, Investor Relations Director of Uxin. Please go ahead.
Thank you, operator. Hello, everyone. Welcome to Uxin's fourth quarter and full year 2018 conference call. Today, DK, our Founder and CEO, and Zhen Zeng, our CFO, will discuss our financial results. Following the prepared remarks, DK and Zhen will address any questions you have. Before we start, I would like to remind you that our statements today will contain forward-looking statements that we make under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events that involve risks and uncertainties which could cause actual results to differ materially from our expectations. Uxin does not undertake any obligations to update any forward-looking statements, except as required under applicable law. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC.
With that, I will now turn the call over to our CEO, DK. Please.
Thank you, Nancy. Hello, everyone. Thank you for joining our fourth quarter and full year 2018 earnings conference call. We are pleased to report that we ended the year with another set of strong results. Total revenue in the fourth quarter increased by 62% to RMB 1.1 billion, exceeding the high end of our guidance. Thanks to our large business scale and prudent control of cost and operating expenses, we continued to gain operating leverage during the fourth quarter. As a result, non-GAAP net loss narrowed to RMB 242 million, declined by over 50% both year-over-year and quarter-over-quarter. It's also very encouraging to see that our gross profit now covers all of our sales and marketing expenses, taking us one step closer to profitability. In the fourth quarter, our 2C business continued to drive overall growth.
We facilitated over 160,000 used car transactions on our 2C platform, almost doubling the number in the same period last year. Total 2C revenue, including revenues from both transaction facilitation and loan facilitation, increased by 118% year-over-year to RMB 937 million, which contributes 82% of our total revenue. We are particularly excited to share that our cross-region transactions experienced a remarkable growth during the quarter. The transaction volume in the category exceeded 10,000 used cars in December alone and over 22,000 for the quarter, compared to only a few hundreds in Q4 2017. This reflects the game-changing impact that our business model has had on China used car supply chain, as well as the growing consumer recognition of Uxin brand and services. Uxin's leadership in facilitating cross-region transaction in China is unmatched.
It plays a key role in bridging used car demand and supply between different tiers of cities across the country. By leveraging Uxin's unique offering of standardized inspection, offline fulfillment, title transfer, as well as all-road after-sales warranty services, we can efficiently provide a consumer in lower tier city with an unmatched purchasing experience and enable them to purchase large ticket items online without the need for the in-person checking. Due to the significant value we provide to our users, we have also made significant progress on monetization. Our 2C transaction facilitation take rate increased to 2.4% in the fourth quarter compared to only 1.2% in Q4 last year. The significant increase was mainly driven by the high volume of cross-region transactions, which had a take rate of 5.3% during the quarter, as well as great pricing power generated from our optimized services.
This translated into a 263% year-over-year increase in our 2C transaction facilitation revenues in the fourth quarter, representing 33% of our 2C revenue, up from 23% in Q4 and 20% in the same quarter last year. With strong momentum in cross-region transaction growth, we believe that the revenue contribution from 2C transaction facilitation will continue to increase. Turning to our 2C loan facilitation business, revenue increased by 81% year-over-year to RMB 620 million during the quarter. Along with growth in 2C transaction volume, we achieved solid growth in the number of loans facilitated, with attach rate increasing to 47% and an average service fee rate of 7%. More importantly, our enhanced risk management capability throughout the entire finance lifecycle enabled us to further lower our M3+ delinquency rate to 1.41% as of Q4 2018, from 1.43% as of Q3 2018.
Through 2019, we will continue to increase our focus on the 2C business, especially the cross-region transactions, where we see great growth potential. To further strengthen our leadership on this front, we will continue to focus our effort in four key areas. First, we will penetrate the lower tier city where we see rapid growth demand for used cars. To better address customer needs, we will expand our current network by adopting a franchising model to complement our self-operating services center. With this initiative, we aim to cover 1,500 country-level cities across China in 2019, enabling customers in these cities to buy their first dream car through our platform. Second, we will enhance our ability to display our used car inventory online in a standardized manner by leveraging our advanced inspection system.
This will enrich our inventory base with more marketable used cars, which will, in turn, help our dealer customers increase inventory turnover and operating efficiency. We believe this will strengthen our relationships with dealers and build a solid foundation for them to also work with us on 2C side. Third, we will further develop our big data capability and AI technology. We will continue optimizing our AI-driven price engine, which evaluates a car condition and provides buyer and seller with price insights. This cutting-edge technology helps customers quickly find their car of choice from our massive online inventory. It also forecasts the residual value of used car, which enables dealers to efficiently manage their operating risk. Fourth, we will optimize overall services process to ensure a seamless one-stop purchasing experience that cover every step of transaction, from online selection to offline end-to-end fulfillment, as well as after-sales services.
Moving on to our 2B business. Transaction volume decreased by 37% to 72,000 used cars, and corresponding revenue decreased by 16% to RMB 145 million in the fourth quarter. The decline reflect our ongoing strategy shift to our 2C business. From a commercial perspective, we see much great growth potential in the 2C business. That said, the 2B business will continue to serve as an important arm of our group as it enable us to maintain strong relationship with our dealer customer and enhance the thickness of our platform. That facilitate our 2C growth. This is particularly the case on the B2B side, where our highly efficient auction platform enable dealers to source used car and optimize inventory turnover, thereby minimizing inventory risk.
By delivering the type of value to dealer, we will encourage our dealer customer to expand a collaboration on our 2C platform, especially in terms of cross-region retail transactions. On the C2B side, with our change of approach to connecting dealer with individual who are selling their used car, we now provide a dealer with inventory leads on more favorable terms. As we implement this strategy and continue to enhance our value proposition, we are confident that we will build on our position as China's largest used car e-commerce platform and continue to redefine the used car industry. With that, I would like to turn the call over our CFO, Zhen Zeng, to talk through our financials. Zhen, please.
Okay, thanks, DK. Hello, everyone. Thanks for joining us today. Now, let me walk you through our financial details of the fourth quarter and the full year of 2018. Note that all numbers are in RMB, unless otherwise stated. Also, please note that some numbers I refer to are non-GAAP. You can find a reconciliation of these numbers in our earnings release. In the fourth quarter, total revenue increased by 62% to RMB 1,137 million from RMB 703 million in the Q4 2017. The increase was primarily due to the increase in 2C transaction volume, transaction facilitation take rate, and amount of loans facilitated. Drilling down to our 2C and 2B business. 2C transaction facilitation revenue was RMB 317 million, an increase of 263% year-over-year from RMB 87 million in the Q4 2017, primarily due to a 94% increase in the 2C transaction volume.
The year-over-year growth rate of our 2C transaction facilitation revenue has been accelerating throughout the year. Our 2C transaction facilitation take rate increased to 2.4% in the Q4 2018 from 1.2% in the Q4 2017. 2C loan facilitation revenue increased by 81% year-over-year to RMB 620 million, primarily driven by the increase in the transaction volume and the amount of loan facilitated. Our service fee rate was 7% during the quarter. The attach rate of loan facilitation service slightly increased to 47% in the quarter, mainly driven by the higher volume contribution from cross regional transactions. In terms of our 2B business, our 2B transaction facilitation revenue reached RMB 146 million, representing a decrease of 16% year-over-year, primarily due to the decline in the transaction volume, which reflects our ongoing strategy shift to the 2C business.
The decrease of 2B transaction volume was mainly because of our change of approach in serving customer with car selling needs, as well as the dealers growing appetite for retail transactions through our 2C platform. Our take rate for 2B transaction facilitation was 4.3% in the Q4 2018, up from 3.1% in the Q4 2017. Cost of revenues increased by 43% year-over-year to RMB 353 million in the Q4 2018, compared to RMB 247 million in the same period last year. This increase was primarily due to the increase in the cost of fulfillment, title transfer, and registration, which were correspondingly driven by the increase in the transaction volume, as well as the increase in the salaries and benefits of employees engaged in the car inspection, quality control, customer service, and after-sales service.
Gross profit was RMB 783 million, and gross margin was 69% in the first quarter of 2018, compared to 65% in the same period last year. Total operating expenses was RMB 1,049 million. Non-GAAP operating expenses, excluding the share-based compensation, were RMB 977 million. Sales and marketing expenses decreased by 1% year-over-year to RMB 689 million, compared to RMB 694 million in the same period last year. The well managed sales and marketing expenses reflects our continuous efforts on increasing operating efficiency and focusing on conversion. Sales and marketing expenses, excluding share-based compensation expenses as a percentage of total revenue, decreased to 61% during the quarter from 99% in the Q4 2017. G&A expenses increased by 79% year-over-year to RMB 272 million in the Q4 2018, from RMB 152 million in the same period last year.
The increase was primarily attributable to the increase in the salaries and benefit expenses, share-based compensation expenses, and professional service fees. G&A expenses, excluding the impact of the share-based compensation expenses, was RMB 201 million, representing 18% of the total revenue in the quarter, compared to 18% in the Q4 2017. R&D expenses increased by 23% year-over-year to RMB 97 million in the Q4 2018, from RMB 78 million in the corresponding period last year. The increase was primarily due to the increase in salaries and benefits expenses. R&D expenses, excluding the impact of share-based compensation expenses, was RMB 96 million, representing 8% of total revenue in the quarter, decreasing from 11% in the Q4 2017. We are confident that we are increasing operating leverage and the prudent approach to expenses management will continue to improve our profitability over time.
Gain from the guarantee liability was RMB 8 million, compared to a loss RMB 15 million in the prior year period. The gain was a result of a slight decrease in the delinquency rate compared to data of the third quarter of 2018. Loss from operations in the Q4 2018 was RMB 266 million, compared to a loss of RMB 483 million in the prior year period. Non-GAAP loss from operations, which exclude share-based compensation expenses, was RMB 194 million, compared to RMB 455 million in the same period last year. Non-GAAP loss from operations as a percentage of total revenue was 17% in the Q4 2018, decreased from 65% in the Q4 2017.
The change in fair value of derivative liabilities was nil in the Q4 2018, compared to a loss of RMB 385 million in the same period last year. We no longer see any impact of derivative liabilities as the preferred shares were converted into the ordinary shares at the time of IPO. Net loss in the Q4 2018 was RMB 315 million, compared to a net loss of RMB 902 million in the prior year period. The narrowed net loss was primarily due to the greater operating leverage and the decrease in the loss from fair value change of derivative liabilities. Non-GAAP net loss, which excludes share-based compensation expenses, was RMB 242 million in the quarter, compared to a loss of RMB 489 million in the prior year period.
Non-GAAP adjusted net loss as a percentage of total revenue was 21% in the Q4 2018, decreased from 69% in the Q4 2017. Turning to our cash position, as of 31st December 2018, Uxin had cash and cash equivalents of RMB 801 million, compared to RMB 677 million as in of Q3 2018, and RMB 292 million as the end of Q4 2017. The company had a short-term time deposit and other investment products of RMB 596 million, compared to RMB 581 million as end of Q3 2018, and RMB 1 million as of the end of Q4 2017. The company had a restricted cash of RMB 2,013 million compared to RMB 1,838 million at end of Q3 2018, and RMB 1,617 million at end of Q4 2017. That was the first quarter result. Let me briefly walk you through some highlights of the full-year results.
In the full year 2018, total revenue increased by 70% year-over-year to RMB 3,315 million, compared to RMB 1,951 million in the 2017. Drilling down to our 2C and 2B business unit, 2C transaction facilitation revenue increased by 180% year-over-year to RMB 645 million. Notably, our take rate for 2C transaction facilitation increased to 1.6% from 0.9% in the prior year. 2C loan facilitation revenue increased by 88% year-over-year to RMB 1,774 million. Our average service fee rate increased to 7% from 60.2% in the prior year. In terms of our 2B business, 2B transaction facilitation revenue increased by 17% year-over-year to RMB 607 million. The take rate for 2B transaction facilitation increased to 4% from 3% in the prior year. Gross profit was RMB 2,176 million in the year 2018, and gross margin increased to 66% compared to 62% in the prior year.
Loss from operations in 2018 was RMB 2,566 million, compared to RMB 1,823 million in the prior year. Non-GAAP loss from operations, which excludes share-based compensation expenses, was RMB 1,514 million, representing 46% of total revenues, decreasing from 85% in the prior year. Net loss in full year 2018 was RMB 1,538 million, compared to the net loss of RMB 2,748 million in the prior year. Non-GAAP net loss, which excludes the share-based compensation expenses and gain from the fair value change of derivative liabilities, was RMB 1,671 million in 2018, compared to RMB 1,696 million in the prior year. Non-GAAP net loss as a percentage of total revenue was 50% in 2018, which decreased from 87% in the prior year.
2018 was the year of investment for Uxin, as we focused on building the resources and the infrastructure that will enable the rapid expansion of our 2C business, particularly cross-regional transactions. With these investments, we have also started to benefit from many opportunities to improve operational efficiency across our business. This was particularly the case in the first quarter of 2018, where we realized a significant reduction in the sales and marketing expenses as a percentage of revenues. Building on a solid foundation, we are confident that we will maintain strong growth momentum into 2019 and continue to improve our operating leverage. Now, turning to the guidance. For the first quarter of 2019, we expect the total revenue to be in the range of RMB 900 million - RMB 950 million.
This forecast reflects the company's current and primary views on the market and operational conditions, including seasonal factors, which are subject to change. That concludes our prepared remarks.
Thank you, Mr. Zeng. Operator, we now would like to open the call for questions.
Certainly.
Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press the pound or hash key. Please ask your question in English and kindly translate it to Chinese. Once again, if you would like to ask a question, please press star one. Our first question comes from the line of Eddy Wang from Morgan Stanley. Please go ahead.
Hi, DK, Michael, Nancy. Thank you for taking my question, and congratulations on the strong results. I have one question regarding the cross-regional transaction. You mentioned that you will focus on the cross-regional transaction, given the greater growth potential. Can you give us more details regarding the economics of such transaction versus non-cross-regional transactions such as the take rate? You have mentioned that in the fourth quarter, it's already reached 5.3%, and the loan attach rate, as well as the GP margin difference. Also, what's your target for the cross-regional transaction in 2019 in terms of the volume and the proportion of the overall B2C transactions?
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Thank you, Eddy. All right. I would like to answer this question. First of all, I would like to review again of our cross-region in our last year and our Q4 results. First of all, we are very excited to say we have already achieved 10,000 transaction volume for cross-region transactions last December, and 40,000 for the full year 2018. Compared to just very few, only hundreds in 2017. We are very confident that in 2019, we expect cross-region transactions will grow by 3 x, equal to around 160,000 used cars. Secondly, talking about take rate. Currently, from Q4, our cross-region transaction, the transaction take rate was 5.3. Because of this number, in last quarter, we increased our total 2C transaction take rate from the 1.2 in 2017 Q4, increased to 2.4 in Q4 last year.
I think driven by volume and both of the numbers, I think because there are three main reasons. First of all, we say the biggest pain point in China used car market is that there's an imbalance between the demand and supply. There is a lot of used car supply in tier 1 cities, such like Beijing, Shanghai. That's a big city, people, they doing the trading business. They sell used car and buy a new car. On the other hand, in lower tier cities, there are a lot of people, they still do not have a car. They want to buy the first one. With the low income, the problem, I think a used car is the best choice for people who buying the first, the traffic vehicle. How to solving that cross-region problem?
I think the only way is using online transaction to benefit the low-tier city, the customers. We can enable them. They can have the massive choice of the used car compared today in the country level city. They may only have 50, 100 used car select. We increase it into 100,000 selected. Secondly, very important why we can increase our take rate, because there are very big price difference for the same car between in the big city and the country level city. In the traditional supply chain, they need a lot of middlemen to transfer the used car from the tier 1 city and go to the low-tier cities. Every middleman, they will ask 8%-10% the arbitrage. That make people who live in the small city, the used car price, the average 20% higher than the big cities.
Today, when we launch the cross-region, the transaction services. We will just cut off all the middlemen. We can enable people who live in the countryside, the city, they can get the same price that's like the people who live in the big cities. That's very big, the value gain from our operation enable we can have a very good monetization on our take rate. I'd like to tell you why we think we should like to do that, the cross-country, the transaction for the retail. When we founded the Uxin, everyone you know, because I only buy used car, I never buy the new one. At the beginning, when I buy the used car, when I founded the Uxin, I'm searching the car cross-country.
In past five years, I changed three cars, and every of this car, even I live in Beijing, I search it cross-country, and I buy from other cities. I believe cross-country selection provide a very significant value to the customer. The used car is a very unique product. The only you can provide the massive selection, that you can just optimize the customer value to them. That is I think the fundamental reason why the cross-region business can have a very strong result, both in our business and also in our financial. I think in the further year, in 2019, we will all in this business, focus doing the four most important things. First of all, we are expanding our sales network. Today, we cover 900 regions.
Our aim at the end of this year, we want to cover 1,500 country-level cities, and we enable 800 million people who live in the lower-tier cities, they are able to buy the fair price, the used car. Secondly, we want to enhance our inspection and the digital display technology, such like VR, such like the video. We want to provide experience. People view the used car online, have almost the same experience that like people view the real car. The third one is we enhance our logistics system. Compare the two numbers. In January 2018, we only have 10,000 routes as transportation routes. At the end of 2018, we have already increased that number to 60,000 routes. At the end of this year, we want to increase the routes going to 90,000.
That will cover every corner in China, the cities, we can deliver a car, go to there. Also we decrease the delivery time from January 2018, that's average 5.7 days, until now, 4.1 days. We want people who are buying the car from our platform, and they can get the car ASAP. The last one is we will enhance our extended warranty and services network. The used car is a very complex product. People not only buy it, people need to use it for a long time. We want to make the used car as simple as possible to the customer. We were expanding our after-sales network to provide the best, the user experience to the customer, and set up the word of mouth for the Uxin brand and the Uxin product.
That's some summaries of our strategy and goals for the cross-region transactions. Eddy?
It's Michael here. I give you some more color on the numbers. In last year, we finished around 40,000 transactions for cross-region services. In this year, we aim to have a four times increase. For the full year, the cross-region will have 20% for the total 2C transaction volume, more than 20%. For your question on the loan, I think today our cross-region transaction have the higher conversion rates for the loan facilitated. Today we maintain 80% of the conversion rate.
Okay.
Eddy.
Thank you, DK. Thank you, Michael. Very clear. Thank you very much.
Thank you, Eddy.
Thank you for the questions. Our next question comes from the line of Ronald Keung from Goldman Sachs. Your line is now open.
Thank you. Thank you, DK, Michael, and Nancy. Firstly, can you give us an update on your Taobao partnership? As we see, the volumes are very strong in the fourth quarter, actually revenues re-accelerated. It seems like the new partnership with traffic is really helping. Are there any updates on any further new initiatives between the two parties? Any promotion days, or should we expect, for example, June 18th, to be another big festival that we should focus on. This brings me to the second question, which is about your first quarter revenue guidance, because this implies around 39%-46% revenue growth, which is quite some slowdown versus the strong 62% revenue growth in the fourth quarter. Could you explain, are there any seasonal factors?
With the partnership, should we expect the rest of the year, particularly during the Alibaba promotion quarters, which are generally second and fourth quarter, should we expect a different growth rate for the remaining part of the year? Would you like me to translate the question?
Yeah, please, Ronald.
Okay.
Yeah, please translate the question.
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Okay, thank you, Ronald. I think I'm going to answer the first question, the corporate with Taobao, and Zhen you can answer the question about the Q1 guidance. Right. We have seen growing traction from Taobao users from our used car offerings since December, when we start our partnership. For December alone, we completed over 3,000 transactions through Taobao, thanks to our partnership and promotion of 12.1 2, the shopping festival. Today, I think we are still at an earlier stage of our cooperation. Driving search traffic is our primary focus for this moment. Our tech team is working with Taobao to optimize the keywords and the search result, as well as standardize the layout of used car on Taobao to be in line with what's shown on Uxin own platform, by adding the video inspection report and the VR function, and among other measures.
I think that going forward, we intend to expand our collaboration into recommendation traffic by leveraging our used car transaction-related data and capability of user profile. We will be able to help Taobao productively recommend a used car of choice to its users. In long term, when our cooperation proves to work well for the meaningful transaction volume created, we will further expand our partnership by tapping into the data cooperation, such as risk profiling, and we believe this partnership will strengthen our leadership in China's used car market and help Taobao expand its product and service offering.
We now have a very good cooperate with Taobao. Almost every two weeks, we will launch the product in the Taobao platform. They cover a lot of the area, include the payment and include the online exhibition of the used car, and also optimize the customer experience when the car being shipped. We will share all the transparency information to the customer. Also we are facilitating with Taobao together to enhance the guarantee and the after-sale service to the customer. Yeah.
Okay. Turning to your second question for the Q1 guidance. Yeah, as you say, we expect our Q1 2019 total revenue in the range of RMB 900 million- RMB 950 million, up to 39%-46%, while for the full year, we expect the total revenue to outpace this growth rate. Our current first quarter 2019 guidance factors in the seasonality. The Spring Festival in this year come in early February, so compared to the mid-February last year, which makes the peak season period in the Q1 shorter than the last year, and the low season period longer, much longer. We have factored in such impact and provide a relatively conservative guidance for the 2019 Q1. For the whole year of 2019, we are confident that we can achieve a much faster year-over-year growth.
Thank you, DK and guys.
Thank you Ronald .
Thank you for the question. Next questions comes from the line of Nick Lai from JP Morgan. Your line is now open.
Yeah. Thank you, DK and Mike. Again, it's Nick from JP Morgan, indeed great results.
Thank you. One simple question on SG&A. I think that was again a great achievement in the fourth quarter. Notice that SG&A expense actually dropped 6% Q on Q in 4Q, at the same time our revenue in the fourth quarter actually grew substantially by over 30% from Q2 last year. Maybe first of all, can you share with us what kind of strategy did we implemented in the fourth quarter and then into 2019? Can we extrapolate that? How should we think about SG&A in 2019? Thank you.
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Okay, it's Michael here. For your question, I think mainly all talking about sales and marketing, because our R&D and G&A is quite stable in this year. As long as our revenue increase and have the operating leverage on the G&A R&D, for the sales marketing, we made a strong progress optimizing sales and marketing expenses and our selling increased leverage in the related expenses. In the Q4, sales marketing expenses as a percentage of revenue declined to 61% compared to 87% in Q3 and 99% in same period last year, as you mentioned.
In the full year of 2018, sales and marketing expenses as a percentage of revenue declined to 81% compared to 113% in prior year. This is a clear demonstration of our growing brand awareness and increasing conversion efficiency, which reflects more accurate consumer targeting and an improvement in the productivity of our sales consultants. Going forward, we expect a through dollar amount of our branding expenses to remain stable while we continue to improve the efficiency of our user acquisition and our sales consultants. We will maintain our prudent approach to expense management and continue to improve our margin profile. Additionally, in 2019, we will adopt a franchise model to complement our self-operated service center, as DK just mentioned. We believe this will reduce our own investment in the sales as well as improve our operating efficiency.
Thank you.
Thank you for the questions.
Thank you.
I'll take the next question from the line of Monica Chen from Credit Suisse. Your line is now open.
Good evening, management. Thank you for taking my question and congratulations to DK, Michael and Nancy for a very strong fourth quarter results. I have two questions here. Number one, can management provide more color about the franchise model as you just mentioned, and we just launched in recent months in order to cover more lower tier cities to extend our network? Can you provide more details like how many agents we are already working with and what's the pipeline for the new sign up? What kind of service we are providing to them, helping them to get more transactions, and what's the revenue sharing with them like?
That's my first question. My second question is on the 2B business side. We noticed we have some changes in the 2B business, and we tend to shift our focus on the 2C business, but can management maybe give us more color on how should we think about the 2B business in terms of the value we are providing to the dealers? Have we observed the total B2B market maybe slowing down given the 2C market is growing faster?
Also, we noticed that the take rate for the 2B business actually improved to 4.3 versus 3.1 same quarter last year. What's likely the trends going forward?
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Okay. Thank you, Monica. This is DK. Let me take the two questions. First, talking about our franchise model. We launched franchise model the Q4 last year. At the end of Q4, we have 200 franchisor join to our sales network. At the end of the February, we have already got 600 franchisor going to our network. It's almost speed every month, 200 franchisor will open. Now from our, the business side, we have over 1,000 the independent franchisor are still on our waiting list to which we open the new store for them. We have a goal that at the end of the year, we want to cover the 1,500 country level cities, especially use the franchise model to cover all this.
That almost mean this year we will open more than 2,500 franchise store that's using this new model. Let me say, for the revenue spread, we basic on the franchisor, their KPI, we will separate 3%-4% to them. We're doing very detailed calculation. Let's say that because the franchisor, they invest everything, include the rental the store and the renovation of the store and they pay all the salary of their staff. We calculate the cost, that we're using the franchisor, it's almost equal in the executive level that such like we use our own staff. By the way, the franchising model has some very good performance present today. I think first of all, they are very self innovative.
Because when we're going to cover all the country level cities, that mean in this level, the shop will be very small and the staff will not a lot of people, normally two or three person. I think if we want to management 2,000 store across the country, that will definitely a very big challenge for management and also the incentive to these people. The franchising model provide a very good self-motivation as we want to say. Also save the cost and give us a very asset level approach to just expanding our network to all this customer. That's franchising model answers. The second question is talking about the B2B strategy. First of all, the year-over-year, the B2B revenue and the transaction is declined. I want to mention that it's on our plan, it's our strategy.
Because we found the 2C business is very, very big and very potential, the gold mine. We just move all our resource into the 2C business. That's also, we're showing the result. We have very significant achievement on our 2C. For the 2B business, I wanted to explain for the short term, medium term, and the long term. For the short term decline, especially in the Q4 and the last Q3, they're mainly due to we change our C2B business model. Last year, no, 2017, we account all our C2B business as a transaction. Since from we mentioned and we stated in last Q2, we changed the approach. Q3 and Q4, we didn't account every C2B transaction into our 2B transaction. That's caused the mainly decline. That's the short term, the driver reason.
For the medium term, we say our cross-region 2C business model is more attractive to our dealer because traditional, if they selling the car goes to our B2B, actually dealer cannot get a very significant profit. Now using the cross-country retail model, they can achieve the better profit because we are helping them to find the end user, not just the wholesale. We see the trend is more and more dealers, they move the transaction decision from the B2B go to our cross-region model. Secondly is, as we all know, we have seven the city open the B2B auction in China. The recent news is more and more cities, such like Xi'an, such like Wuhan, such like Jinan, these cities is growing their local supply.
More and more people, they will not go very far, such like from Shandong go to Beijing to take the inventory. They have another choice, take inventory from Jinan. In last year, we didn't expanding our B2B business. That's, I think in the medium term, it's a reason why our 2B business will have a little bit decline because we didn't invest into this business more. For the volume, I think we will gradually to stabilize the certain level and the current certain level. We are happy to say the current take rate is also good. For the long term, I think 2B business is very important. If we say the Manheim in U.S., we say some other, the auction company in Europe and Japan, they are mainly source of their car is coming from the very big supplier.
That's like a fleet company, that's like the rental company. Today in China, the used car supply are very fragmented. It all come from dealers. I think we will keep our 2B business as very important part of the group business, one part of our group business. I think we are watching the opportunities. Once the market have some of the big supply happened, I think we will, at that time, to keep our competitive advantage of the B2B business, and we will enhance our investment of 2B business. Yes. Thank you.
Thank you for the question. I'll now like to hand the call back to Nancy for closing remarks.
Thank you, everyone, for joining to this call and for your continuous support for Uxin. We look forward to speaking to you again in the future. Thank you.
Thank you, everyone.
Thank you, ladies and gentlemen. That does conclude the conference for today. You may now disconnect your line.