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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. On Chinese social media, rumors spread alleging that Didi had sold sensitive user information and traffic data to the US, creating a national security risk. Didi’s management denied the accusations.
On July 4, the regulator made an announcement claiming Didi had illegally collected and used riders’ personal data, and ordered app stores to remove the app. A year later, the Cyberspace Administration decided that the company had violated three laws governing network security, data security, and the protection of personal information—all of which had come into effect only after the ban was announced.
At the time, some analysts thought the threats over data security were aimed at persuading Didi to cancel its US listing and move its IPO to Hong Kong, and that its ban, and the charges against it, were punishment for defying Beijing’s wishes.
Other tech companies certainly took the hint, and several—including content-sharing app Little Red Book, podcast platform Himalaya, and cargo service platform Huolala—shelved their plans to go public in the US.
The pressure on Didi was only part of a much wider crackdown on Big Tech companies in China. In November 2020, the IPO of the massive fintech company Ant Group was suspended after its founder, Jack Ma, criticized China’s financial regulators. At least a dozen companies, including the tech conglomerates Tencent and Alibaba, search giant Baidu, and food delivery company Meituan were investigated and fined under anti-monopoly rules. 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 mess around with regulators’ demands, because they will take drastic action if necessary,” says 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 had been told explicitly not to go ahead with a listing.”
After Didi was cut from app stores, passengers and drivers who had previously registered could still use the service as normal, but it was impossible to create a new account. It felt like a harsh punishment, but came at a point when growth had already stalled in the ride-hailing industry.
Government statistics show that the number of ride-sharing service users peaked in December 2018, at 389 million. Over the next two years, the number declined to 365 million. The percentage of users who regularly booked rides fell at the same time, largely due to the Covid-19 pandemic and strict lockdowns across most of China.
Jeff Li, a tech analyst and former director at consultancy Accenture China, told WIRED that by the time the Didi Chuxing app had been removed from app stores, most of the country’s potential ride-hailing customers already had an 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 to spend on marketing and promotions for drivers and customers. Meituan launched a new ride-sharing app in July 2021, and within two months had rolled it out to more than 200 cities. In September 2021, the B2C ride-sharing platform Caocao Travel announced the completion of a RMB3.8 billion ($560 million) Series B. The following month, its competitor T3 announced it had received a RMB7.7 billion ($1.1 billion) Series A. The new apps used the cash to expand into new cities and offer incentives to attract drivers.
English (US)