Electric vehicle charging stations not only contribute to a greener transportation sector but also boost local business spending, according to a recent study.
Electric vehicle (EV) charging stations are crucial for transforming the transportation industry to be more environmentally friendly. A fresh study carried out by researchers at MIT indicates that these stations benefit local economies as well.
The research revealed that in California, the establishment of a charging station led to an average annual increase of approximately $1,500 in spending at nearby businesses in 2019 and around $400 from January 2021 to June 2023. This uptick can result in thousands of additional dollars each year for establishments in the vicinity, and the impact is particularly strong for businesses in underserved neighborhoods.
The study’s authors aim to provide a broader insight into the advantages of EV charging stations, extending beyond just environmental benefits.
“The financial boosts equate to a significant portion of the expense involved in installing an EV charger, and I hope this study highlights these economic advantages,” said lead author Yunhan Zheng MCP ’21, SM ’21, PhD ’24, who is a postdoctoral researcher at the Singapore-MIT Alliance for Research and Technology (SMART). “Our findings could also create alternative income sources for charger providers and site hosts, leading to more strategic business models for EV charging stations.”
Zheng’s co-authors on this research, published today in Nature Communications, include David Keith, a senior lecturer at the MIT Sloan School of Management; Jinhua Zhao, a professor at MIT specializing in cities and transportation; and alumni Shenhao Wang MCP ’17, SM ’17, PhD ’20 and Mi Diao MCP ’06, PhD ’10.
Grasping the EV influence
The expansion of EV charging stations is regarded as crucial for achieving a cleaner transit sector. Consequently, the 2021 U.S. Infrastructure Investment and Jobs Act allocated $7.5 billion to create a national network of public EV chargers throughout the country.
However, extensive private investment is also necessary to ensure charging stations are widely available.
“The U.S. is heavily investing in EV chargers and actively promoting EV adoption, but many charging service providers struggle to achieve profitability at this point, making it a significant challenge,” Zheng notes.
Supporters of EVs have long asserted that charging stations offer economic upsides for neighboring communities, but Zheng mentions that prior studies depended on surveys or were limited in scale. Her collaborative team aimed to provide concrete evidence to support these claims.
For their investigation, the researchers compiled data from over 4,000 charging stations in California and analyzed information from 140,000 businesses, utilizing anonymized credit and debit card transaction data to track changes in consumer spending. They examined data from 2019 to June 2023, intentionally excluding the year 2020 to reduce the influence of the pandemic.
To determine if the presence of charging stations resulted in increased customer spending, they compared transaction data from businesses located within 500 meters of new charging stations both before and after those stations were established. They also assessed spending trends from similar businesses not situated near charging stations during the same period.
Powering local businesses
The analysis demonstrated that setting up a charging station led to a 1.4 percent average increase in annual spending for nearby businesses in 2019, and a 0.8 percent rise from January 2021 to June 2023.
While these percentages may seem modest on a per-business basis, they translate into significant overall increases in consumer spending. Specifically, these figures represent nearly $23,000 in total spending growth in 2019 and around $3,400 yearly from 2021 to June 2023.
Zheng notes that the reduction in spending increase in the second timeframe may be attributed to a saturation of EV chargers, leading to lesser usage, along with a general decline in per-business spending following the Covid-19 pandemic and a decreased number of businesses served by each charging station during this period. Nevertheless, the annual financial impact of a charging station on neighboring businesses can still cover about 11.2 percent of the typical infrastructure and installation expenses associated with a standard charging station.
Across both periods examined, the highest spending increases were observed from businesses located roughly the distance of a football field from the newly established stations. Notably, significant benefits were also recorded for businesses situated in disadvantaged and low-income regions, as defined by California and the Justice40 Initiative.
“The positive effects of EV charging stations on local businesses extend beyond just high-income neighborhoods,” Wang emphasizes. “This underscores the necessity for policymakers to prioritize the development of EV charging stations in marginalized areas, as they not only contribute to environmental betterment but also enhance economic vitality.”
Zheng feels the study’s outcomes offer valuable insights for charging station developers striving to make their projects profitable.
“A business model that blends gas stations with convenience stores could similarly be applied to EV charging stations,” Zheng suggests. “Historically, many gas stations are linked with retail chains, enabling owners to sell fuel and draw in customers to broaden their revenue avenues. EV charging service providers might adopt a comparable strategy to leverage the advantageous effects of their stations.”
Furthermore, Zheng believes these results could pave the way for new funding strategies for charging stations, such as pooling resources among multiple businesses to share construction costs and collectively benefit from increased spending.
Such innovations could hasten the establishment of charging networks, although Zheng cautions that additional research is necessary to comprehend the broader applicability of the study’s findings to other regions. She encourages further investigations into the economic impacts of charging stations and hopes future studies will encompass states beyond California and other countries as well.
“Numerous studies have concentrated on retail sales effects stemming from traditional transportation infrastructure, like rail and subway stations, bus stops, and street layouts,” Zhao notes. “This research provides compelling evidence for a rising element of transportation infrastructure and highlights its consistently positive influence on local businesses, paving the way for future inquiries in this domain.”
The research was partially supported by the Singapore-MIT Alliance for Research and Technology (SMART) and the Singapore National Research Foundation. Some support for Dao came from the Natural Science Foundation of Shanghai and the Fundamental Research Funds for the Central Universities of China.
