by Didi went public on June 30, 2021 at a valuation of $68 billion. Two days later, on the evening of July 2, the Cyberspace Administration of China, the country’s internet regulator, announced that it would review Didi’s cybersecurity. Rumors spread on Chinese social media that Didi had sold sensitive user information and traffic data to the US, posing a national security risk. Didis management rejected the allegations.
On July 4, the regulator made an announcement alleging that Didi had illegally collected and used drivers’ personal information and ordered app stores to remove the app. A year later, the Cyberspace Administration ruled that the company had violated three laws on network security, data security and personal data protection, all of which had come into effect after the ban was announced.
At the time, some analysts thought the data security threats were aimed at persuading Didi to delist its US listing and move its IPO to Hong Kong, and that its ban and charges against it were punishment for conforming to Beijing’s wishes to oppose.
Other tech companies certainly took the hint, and several — including content-sharing app Little Red Book, podcast platform Himalaya, and freight-services platform Huolala — have shelved plans to go public in the U.S.
The pressure on Didi was just part of a much broader crackdown on big tech companies in China. In November 2020, giant fintech Ant Group had its IPO suspended after its founder, Jack Ma, criticized Chinese financial regulators. At least a dozen companies, including tech giants Tencent and Alibaba, search giant Baidu and food delivery company Meituan, have been investigated and fined under antimonopoly regulations. In mid-2021, an effective ban on after-school tutoring wiped billions of dollars off the value of China’s edtech sector.
“The tech industry has learned not to put up with demands from regulators because they will take drastic action if necessary,” said Rui Ma, a China tech analyst and founder of Tech Buzz China. “Especially in the case of Didi, where it was rumored that the company was specifically told not to list on the stock exchange.”
After Didi was removed from the app stores, passengers and drivers who previously registered could continue to use the service as usual, but it was impossible to create a new account. It felt like harsh punishment, but it came at a time when growth in the ride-hailing industry was already faltering.
Government statistics show that the number of ridesharing service users peaked at 389 million in December 2018. In the next two years, the number dropped to 365 million. The percentage of users who regularly booked rides fell at the same time, mainly due to the Covid-19 pandemic and the strict lockdowns in most parts of China.
Jeff Li, a tech analyst and former director of consulting firm Accenture China, told WIRED that by the time the Didi Chuxing app was removed from app stores, most of the country’s potential ride-hailing customers were already on had account.
Second-tier ride-hailing companies saw Didi’s suspension from app stores as a great opportunity to gain market share and began raising funds for marketing and promotions aimed at riders and customers. Meituan launched a new ride-sharing app in July 2021 and launched it in more than 200 cities within two months. In September 2021, B2C ride-sharing platform Caocao Travel announced the closing of a 3.8 billion RMB (US$560 million) Series B. The following month, its competitor T3 announced it had received a 7.7 billion RMB ($1.1 billion) Series A The new apps used the money to expand into new cities and provide incentives to attract drivers.
