Electric vehicles are transforming mobility, economies and payments

December 2024 - While the journey toward reducing carbon emissions from transportation has taken a few detours, the world is still heading toward a future in which electric vehicles (EVs) will reshape personal mobility. In 2023, EV sales accounted for at least half of all new cars sold in key Nordic countries (see figure below), a milestone China also reached in mid-2024. If current projections and public commitments hold, the rest of the world could cross the same threshold by 2030, aided by an expanding network of public chargers.

More than simply a technological shift, EVs represent a transformative economic force. Anonymized transaction data from VisaNet reveals that multi-car households with EVs spend 28 percent less on gasoline and are less sensitive to fluctuations in gasoline prices. Furthermore, businesses located near chargers enjoy higher sales than those farther away, with grocery stores and restaurants benefiting the most. Viewed from a broader lens, EVs are becoming an economical option for younger consumers with the means in emerging economies, where innovative financial and subscription models are reducing upfront costs.

As countries around the world roll back consumer subsidies for EVs, further EV adoption will depend more on delivering a better consumer experience and value. Efficient and user-friendly payment solutions can play a critical role in this next phase of the industry’s development. A frictionless payment approach based on an open-loop system, where a single bank-issued card can be used for all payments—whether contactless or card-on-file—could streamline transactions and enhance the charging experience.

Highlights:

Among emerging markets, China is the leader in auto sales, with Chinese domestic new car sales exceeding new car sales in the EU and the U.S. combined since 2021.² Auto industry trends are now set in China, and the country’s future is electric. As of June 2024, half of all new cars sold in China are now EVs, according to data from the China Passenger Car Association. This could rise to nearly 70 percent by 2030, based on earlier forecasts from the International Energy Agency (IEA).

Younger consumers who can afford cars in emerging economies are increasingly considering EVs, thanks to subscription models that lower the costs over the long-run. Consumers, particularly in emerging economies where EVs are made locally and cheaper, are more inclined to buy electric cars. Further, there is a growing eco-friendly mindset. Over half of those who can afford them agree that electric cars are the motor industry's future (see figure below). Consequently, this could lead to strong demand for electric cars in emerging markets, where they might be the first choice for young buyers.

Alongside rising demand, the private sector is swiftly building supply side infrastructure, such as battery swapping systems and charging stations, to enhance the ease and convenience of owning an electric vehicle. Already, emerging markets like India are witnessing record EV sales. India is arguably the most innovative market for affordable electric vehicles that have reached the tipping point of cost and convenience. India's EV policy has incentivized more charging stations, resulting in faster growth in electric car sales compared to the global average (71 percent vs. 35 percent in 2023). Moreover, India’s battery-as-a-service model facilitates quick battery swaps, similar to traditional refueling times, that enable EV drivers to save time and travel longer distances. Drivers pay a periodic subscription fee to battery service providers over the vehicle’s lifespan. This subscription model separates battery costs from the price of the vehicle, further encouraging EV adoption. As electric cars approach price parity with traditional internal combustion engine (ICE) cars and charging points become more widespread, other countries are likely to see similar exponential growth in EV adoption.

As charging networks continue to expand, consumer spending is shifting toward areas with chargers. Merchants near new charging locations saw a boost in sales with each opening from 2022 to 2023, according to analysis of data from VisaNet and the U.S. Department of Energy. Within the first 90 days of a charging location’s opening, spending at merchants within a half-mile radius increased by 2 percent—equal to 17 more transactions per day.

The charging stations in this analysis were in areas with an average of six restaurants and four grocery stores or pharmacies, which are also the types of merchants that see the greatest lift. Food and drug retailers, for example, saw nearly three more transactions per day, per merchant with the opening of a new charger, followed by restaurants (both full and quick-service) (see figure below).

This shift suggests that a significant number of EV drivers are shopping at nearby merchants before, during or after charging their EVs, and potentially selecting merchants based on their proximity to EV chargers. Additionally, it largely reflects spending by affluent homeowners—the largest group that spends on EV charging—as well as by frugal renters, who over-index on spend per average card for EV charging transactions relative to other segments.³

For consumers, greater EV adoption could buffer their spending from swings in oil markets, leading to more stable spending through commodity cycles. In many markets, motor fuel accounts for the largest cost of operating personal transport. These costs in turn represent between 4.6 percent and 6.2 percent of total consumer spending in emerging markets and advanced economies, respectively. Research has shown that oil prices can have an even greater impact on consumer spending. For example, the sharp rise in gasoline prices in 2022 may have added further fuel to the spike in consumer prices by boosting inflation expectations,⁴ and elevated gas prices in 2007 could have contributed to the U.S. housing and financial crisis by putting further strain on already financially stressed households.

Even in countries where EV adoption is still in its early stages, such as the U.S., oil prices’ impact on consumption is weakening. U.S. EV-owning households tend to be in the top third by income and own multiple cars, according to our analysis of anonymized transaction data.⁵ As the top third of U.S. households account for over 45 percent of all gasoline spending, changes in their spending patterns could impact aggregate gasoline consumption. In fact, analysis of transaction data shows that only 1 in 5 households matching the consumer profile of an EV owner actually owns one, suggesting significant growth potential. On average, multi-car households with EVs save $325 a year on gasoline. They also have slightly more flexibility to reduce spending during oil price increases. For every 10 percent increase in gasoline prices, EV owners cut their gasoline spending by 1 percentage point more than their non-EV counterparts.

By 2023, nearly 14 million EVs were sold annually, representing an average annual growth rate of 57 percent over the past decade. Over the next decade, maintaining this sales growth faces new speed bumps, as governments end economic incentives to promote greater EV adoption. Already, Sweden has stopped providing incentives for EV purchases as of 2022.⁶ Norway and Germany reduced their incentives in 2023, and, following its recent presidential election, the U.S. is widely expected to follow suit.^7,8 How far a country is along the EV adoption curve could determine the impact of these policy changes. For example, some studies suggest that the U.S. market is approaching the tipping point where consumers’ increased acceptance of EVs and expansion of the charging infrastructure could be enough to sustain EV adoption if subsidies are pulled.^9,10,11 Our research, though, shows that EV adoption is still largely limited to early adopters and has not yet developed mass appeal.

Although EV charging primarily takes place at home, access to external charging points will play a key role in further EV adoption. In the U.S., for instance, the number of DC fast-chargers per charging location increased from 3 to 4 between 2015 and 2023, but EV growth during the same period far outpaced it: The number of EVs per charging location jumped from about 27 in 2015 to 75 in 2023 (see figure below). Meanwhile, governments are examining not only the availability of public charging stations, but also how convenient they are. For instance, the EU is developing a competitive market with open access to all parties interested in establishing and operating charging points to address the uneven distribution of public charging infrastructure.¹²

While more EV chargers will help, enabling more convenient payments for charging could also accelerate adoption. Currently, drivers must register with multiple EV charging networks, making the process cumbersome. Unlike refueling, EV charging often involves special apps or cards and lengthy registrations. This issue can be addressed through open-loop payments, which allow the use of regular cards or digital wallets without additional steps such as logging into a mobile app or using a proprietary RFID card or dongle. This system would simplify transactions and eliminate the need for proprietary cards. Already, new regulations require public charging points in EU countries to be digitally connected, meaning they can send and receive real-time information with the electricity grid and vehicles. This enables the development of interoperable payment solutions and enhances the charging experience for operators and drivers.¹³

Footnotes

Forward-Looking Statements 

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