Insights | State investors place their bets as rivals close in on crippled Didi

China’s July crackdown on Didi has had knock-on effects for the wider ride-hailing market, as investors scurry to fund competitors cranking up efforts to steal market share from the ride-hailing monopoly.

Remarkably, this time it is not seasoned venture capital funds but state-owned investors including Citic that are pouring billions of RMB into promising up-and-comers. The leading beneficiaries so far are automaker Geely’s Cao Cao and T3, a ride-hailing service backed by three other domestic automakers. The investments follow more than three months of speculation that Chinese regulators could impose heavy fines, break up the company, or even demand a complete takeover by the state. Didi was listed on the New York Stock Exchange in late June but, less than one week later, cybersecurity regulators forced the removal of Didi’s app from online stores.

Bottom line: Venture capitalists are bullish that upstarts can catch up with the longstanding leader in China’s ride-hailing industry because Didi has been losing momentum ever since its app was suspended. However, the challengers still have to tackle the same regulatory problems Didi has faced.

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