Apart from cleaning up the transportation sector, charging stations for electric vehicles (EVs) are also good for business, a new MIT study suggests.
Research revealed that in California, the introduction of a charging station resulted in an average rise in yearly spending at local businesses by approximately $1,500 in 2019 and around $400 from January 2021 to June 2023.
This increase in consumer spending translates to thousands of additional dollars annually for nearby businesses, with a more significant impact observed in underresourced areas.
Beyond its environmental impact, the study’s authors hope their study paints a more holistic picture of the benefits of EV charging stations.
Diversify Income Streams
Lead author Yunhan Zheng, a postdoc at the Singapore-MIT Alliance for Research and Technology (SMART), said:
“These increases are equal to a significant chunk of the cost of installing an EV charger, and I hope this study sheds light on these economic benefits. The findings could also diversify the income stream for charger providers and site hosts, and lead to more informed business models for EV charging stations.”
Zheng’s co-authors include David Keith, a senior lecturer at the MIT Sloan School of Management; Jinhua Zhao, professor of cities and transportation at MIT; and alumni Shenhao Wang and Mi Diao, both with PhDs. Their paper has been published in Nature Communications, and the citation can be found at the end of this article.
Image created by Market Business News.
Understanding the EV effect
Expanding the availability of electric vehicle charging stations is considered a critical step toward creating a more sustainable and electrified transportation system. In response, the 2021 U.S. Infrastructure Investment and Jobs Act allocated $7.5 billion to establish a nationwide network of public EV chargers.
However, substantial private investment will also be required to ensure charging stations become widespread.
Zheng says:
“The U.S. is investing a lot in EV chargers and really encouraging EV adoption, but many EV charging providers can’t make enough money at this stage, and getting to profitability is a major challenge.”
EV advocates have long claimed that the introduction of charging stations bring benefits to local businesses and communities. However, previous studies on their impact were small-scale or relied on surveys, Zheng explained. Her team wanted to make the advocates’ arguments more *empirical.
* ‘Empirical’ refers to information or conclusions that are based on observed and measured evidence, often gathered through experiments or real-world data, rather than relying solely on theory, assumptions, or anecdotal reports. It emphasizes objective validation through tangible results and rigorous analysis.
In their research, the team gathered data from more than 4,000 charging stations across California and analyzed spending patterns from 140,000 businesses using anonymized credit and debit card transactions. They focused on data from 2019 through June 2023, deliberately omitting 2020 to reduce the influence of the pandemic on their findings.
To determine whether EV charging stations boosted customer spending, they compared data from businesses within half-a-kilometer (0.31 miles) of new charging stations before and after they were installed. They also compared the same data from businesses that were not near the new charging stations.
Supercharging businesses nearby
The researchers’ data showed that nearby establishments experienced a 1.4% increase in revenue in 2019 and 0.8% from January 2021 to June 2023 following the installation of a new charging station.
Although these percentages may seem modest for individual businesses, they represent significant gains in overall consumer spending. In fact, these increases correspond to nearly $23,000 in additional cumulative spending in 2019, and around $3,400 annually between 2021 and June 2023.
Economic Impact of Charging Stations
Zheng suggests that the reduced spending growth between the two periods could be attributed to a saturation of EV charging stations, resulting in lower usage.
Additionally, there was a general decline in business spending after the Covid-19 pandemic, along with fewer businesses being served by each charging station in the latter period.
Nevertheless, even with this reduction, the annual impact of a charging station on surrounding businesses still accounts for roughly 11.2 percent of the typical infrastructure and installation costs for a standard unit.
Key Beneficiaries of Charging Stations
Businesses within about the distance of a football field from the new EV charging stations experience the highest spending increases.
Increases were also significant for businesses in disadvantaged and low-income areas, as designated by California and the Justice 40 Initiative.
Wang says:
“The positive impacts of EV charging stations on businesses are not constrained solely to some high-income neighborhoods. It highlights the importance for policymakers to develop EV charging stations in marginalized areas, because they not only foster a cleaner environment, but also serve as a catalyst for enhancing economic vitality.”
Implications for Future Projects
Their findings hold a lesson for developers of charging stations who are seeking to improve their projects’ profitability, Zheng believes.
Zheng says:
“The joint gas station and convenience store business model could also be adopted to EV charging stations. Traditionally, many gas stations are affiliated with retail store chains, which enables owners to both sell fuel and attract customers to diversify their revenue stream.”
“EV charging providers could consider a similar approach to internalize the positive impact of EV charging stations.”
New Funding Models and Further Research
Zheng adds that the findings could inspire new funding models for EV charging stations, such as having multiple businesses share the construction costs to collectively benefit from the increased consumer spending.
Those changes could speed up the creation of EV charging networks, but Zheng cautions that further studies are required determine whether the study’s findings can be extrapolated to other areas, and if so, by how much.
She encourages researchers to conduct additional studies on the economic impacts of charging stations, hoping future research extends to states outside of California, and perhaps, even to other countries.
Zhao says:
“A huge number of studies have focused on retail sales effects from traditional transportation infrastructure, such as rail and subway stations, bus stops, and street configurations.”
“This research provides evidence for an important, emerging piece of transportation infrastructure and shows a consistently positive effect on local businesses, paving the way for future research in this area.”
The study was supported in part by the Singapore National Research Foundation and the Singapore-MIT Alliance for Research and Technology (SMART). Dao was partially supported by the Fundamental Research Funds for the Central Universities of China and the Natural Science Foundation of Shanghai.
Citation:
Zheng, Y., Keith, D.R., Wang, S. et al. Effects of electric vehicle charging stations on the economic vitality of local businesses. Nat Commun 15, 7437 (2024). https://doi.org/10.1038/s41467-024-51554-9