Because if the election happened, communist would win. But the reason here is not like South Vietnamese said. North Vietnam had more people, sure but the reason here is because Diem can not win against Ho Chi Minh if the election happened.
If you put two of them on the scale, you will see why.
Ho Chi Minh was a popular leader, even before 1945. His army, Vietminh was the most popular movement in all Indochina. Their cadets can reach even the farthest villages in Vietnam even where the French didn't bother to come.
Ho Chi Minh and his movements defeated French. Unless you working with French for money then you hate them, mostly poor farmers hate them, and farmers were 90% of Vietnamese population of that time. And farmers don't care about communism or capitalism, if you get rid of France then you got their support. North Vietnamese hate French more due to the long tradition of wars against China, the great famine in 1945, and the North is less abundant land than the South so their life is far harder than South Vietnamese.
Diem was unpopular, he didn't do much as he working with French. He is a Catholic and Diem's favoritism toward Catholic. Talk about Catholic, they are outsiders, they helped France with their conquest of Indochina, most well known is they helped France in Tokin campaign, so the hartred is quite deep. So his religion is also a minus. He won the election through rigged but he know this won't work twice.
Unlike North Vietnam where Ho Chi Minh and his party had total power and support from population. South Vietnam had more land than the North so they wouldn't need the government support. That make their life less harder but also they don't care much about who is in power. And in Indochina war, to win against Vietminh in the South led by Nguyen Binh, French supported to all sides in the South to pacify South Vietnam, namely Hoa Hao, Cao Dai. That make the South Vietnamese is more divided. But even all of that, Vietminh is still the most popular.
The true nature of South Vietnam government is a puppet government created by French to undermine the Vietminh, it call “Bao Dai solution”, it won't take long for people know it true face.
With all of that combine the chance Diem can win against Ho Chi Minh in fair election is laughable, can compare with someone believe Saigon was richer than Singapore in 1965. In fact US see how the Diem government without US support.