Didi went public on June 30, 2021, valued at $68 billion. Two days later, on the evening of July 2, the Cyberspace Administration of China, the country’s internet regulator, announced that it was reviewing Didi’s cybersecurity. Rumors spread on Chinese social media that Didi was selling sensitive user information and traffic data to the US, posing a national security risk. Didi management denies the allegations.
On July 4, the regulator issued a statement that Didi was illegally collecting and using riders’ personal data and ordered app stores to remove the app. A year later, the Cyberspace Administration ruled that the company violated three laws governing network security, data security, and personal information protection — all of which took effect only after the ban was announced.
At the time, some analysts believed that the data security threats were aimed at persuading Didi to cancel its US listing and move its IPO to Hong Kong, and that the ban and charges against it were punishment for defying Beijing’s wishes.
Other tech companies have certainly taken the hint, with several including content-sharing app Little Red Book, podcast platform Himalaya and freight services platform Huolala delaying plans to go public in the US.
The pressure on Didi was just part of a much broader crackdown on big tech companies in China. In November 2020, the IPO of major fintech company Ant Group was suspended after its founder Jack Ma criticized China’s financial regulators. At least a dozen companies, including tech conglomerates Tencent and Alibaba, search giant Baidu and food delivery company Meituan, have been investigated and fined under antitrust rules. In mid-2021, an effective ban on after-school tutoring wiped out billions of dollars in value from China’s edtech sector.
“The tech industry has learned not to mess around with regulatory demands because they will take drastic measures when necessary,” says Rui Ma, a Chinese tech analyst and founder of Tech Buzz China. “Especially in the case of Didi, where there were rumors that the company had been expressly told not to go ahead with the listing.”
After Didi was removed from the app stores, passengers and drivers who had previously registered could still use the service as usual, but it was not possible to create a new account. It felt like a harsh punishment, but it came at a time when the growth of the ride-hailing industry had already stalled.
Government statistics show that the number of users of ride-sharing services peaked in December 2018 at 389 million. Over the next two years, their number decreased to 365 million. At the same time, the percentage of users who regularly book trips has fallen, mainly due to the Covid-19 pandemic and strict lockdowns in much of China.
Jeff Lee, a tech analyst and former director of consultancy Accenture China, told WIRED that by the time the Didi Chuxing app was removed from app stores, most potential customers in the country already had accounts.
Second-tier ride-hailing companies saw Didi’s suspension from app stores as a great opportunity to gain market share and began raising funds to spend on marketing and promotions to drivers and customers. In July 2021, Meituan launched a new ride-sharing program and rolled it out to more than 200 cities within two months. In September 2021, B2C ride-sharing platform Caocao Travel announced the completion of a 3.8 billion yuan ($560 million) Series B. Its rival T3 announced a 7.7 billion yuan ($1.1 billion) Series A the following month. The new apps used the money to expand into new cities and offered incentives to attract drivers.
