Why Uxin Shares Soared Again Today

What happened

Shares of Uxin Ltd (NASDAQ: UXIN) were revving higher again today as investors continued to applaud the company's new relationship with Alibaba's (NYSE: BABA) Taobao Marketplace. Uxin, the owner of China's largest used car e-commerce business, gained 31% yesterday after the company announced the news, and then tacked on another 24.5%.

So what

Uxin said it would form a strategic partnership with Taobao to collaborate on B2B and B2C used-car transactions, integrated supply chain, and used-car loan facilitation.

The two companies plan to establish an online used-car shopping mall on Taobao Marketplace and will provide services to customers, including video and VR (virtual reality) viewing to give them an enhanced look at the car's condition.

Uxin CEO Kun Dai said, "By combining Uxin's unique ability to support cross-regional used car transactions with Taobao's massive e-commerce traffic and superior data capabilities, we are confident that we can take the used car purchasing experience to the next level." Taobao President Fan Jiang added. "Through the combination of Uxin's nationwide supply chain and Alibaba's massive traffic, our partnership will bring significant benefits to both used car consumers and business customers."

Taobao is the world's biggest e-commerce website with more than 617 million monthly active users. Similar to EBay, it functions in part as a consumer-to-consumer marketplace, making it a good fit with Uxin's consumer-focused segment. Considering Taobao's size and reach, the relationship should help spur Uxin's growth and visibility.

Now what

Part of the reason for the surge in Uxin stock may be that it had fallen so far prior to the announcement. After the stock debuted at $9 a share in June, it was trading below $3 earlier this week, falling nearly 70% after its IPO as worries about a trade war with China have largely pushed down Chinese stocks. Uxin's most recent earnings report also failed to wow investors, as the stock fell double digits after its release.

However, the Taobao tie-up shows the potential of Uxin. The used-car platform is already growing fast, with revenue up 60% in its most recent quarter. Working with Taobao should only help Uxin capture a larger share of the fast-growing market.

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Jeremy Bowman owns shares of Uxin Ltd. The Motley Fool recommends eBay and Uxin Ltd. The Motley Fool has a disclosure policy.