The subscription model in the automotive industry: a tool for co-creators identification

12 
 
 
RESEARCH FUNDAMENTALS 
 
 
 
 
 Introducing the research project 
The mobility industry has been hardly revolutionised through time. No surprise, the 
introduction of the internal combustion engine (ICE) in the middle of the nineteenth century 
represents the very last truly disruptive innovation in the sector, as it has been underlined 
by the famous quote by Henry Ford: “If I had asked people what they wanted, they would 
have said faster horses”. 
Nevertheless, the automotive industry is currently facing a structural transformation that 
is expected to shake the individual mobility paradigm of the past century (Urry, 2004). In 
fact, the benefits that people have experienced since the democratization of car usage 
have become so embedded in our daily life (Gärling & Axhausen, 2003) that hypothesise 
its dismission seems to be almost impossible.  
Indeed, mainly due to digitalization, individual mobility is migrating from an all-purpose to 
fit-for-purpose mobility, supporting the servitization of the industry (McKinsey & Company, 
2016). At the same time, regulators are forcing manufacturers to accelerate the mass 
introduction of alternatives to internal combustion engines (ICE), primary with the aim of 
reducing the carbon emissions. The quest for a solution seems to indicate that electric 
vehicles (EV) could provide a valid alternative, although this technology still requires 
further development before ensuring the required performances (The Boston Consulting 
Group, 2017). 
Recently, car manufacturers have started to offer vehicle subscription-based services as 
a new form of car ownership (Edmunds, 2018). Combining hassle-free access to the car 
with the flexibility of choosing the perfect type of vehicle for every occasion, they rapidly
Introduction 
13 
 
caught the attention of industry experts that believe it could become an interesting solution 
for the future while reducing the financial risk for the present (Lachnit, 2018).  
However, no clear evidence has still been found on how companies should leverage the 
introduction of subscription-based services on a strategical level. As a matter of fact, the 
argument that manufacturers could benefit mainly by intensifying the relationship with the 
final customers (Hill, 2015) to involve drivers in co-creative processes that are key in 
establishing a sustainable long term competitive advantage (PWC, 2013) seems to have 
an attracting motivation in favour of the subscription-services introduction.  
The following research project develops this strategic suggestion, aiming at investigating 
the relationship between vehicle subscription-based services and the co-creative 
behaviour of potential customers, in order to eventually obtain empirical evidence that 
could support the development of further literature in the field.  
In particular, the focus will be on whether developing a subscription platform based on the 
characteristics of a participative environment could attract particularly people that are used 
to participate in co-creative processes (Bruns, 2006). Such a conclusion would have 
particularly relevant implication for the industry, suggesting that by developing co-creative 
initiatives through subscription platforms, it would offer companies a new tool for strategy 
development.  
Secondly, the research aims at identifying a model that would help to identify which are 
the variables that explain the adoption of such a service. In particular, it will be tested the 
possibility of applying the existing attitudinal-based car choice model (Choo & Mokhtarian, 
2004) to the adoption rate.
Introduction 
14 
 
 The structure of the research project 
 
 
Figure 1: Research structure 
Source: Personal Elaboration
 
The research project is composed of five parts (see Figure 1). The introduction is aimed 
at delineating the aspects of the investigation, its main theoretical bases, its objectives 
and its research questions. Thus, the methodology is elucidated before the project 
conduction.  
The second part of the elaborate is devoted to the market analysis of the context in which 
experience-driven vehicle subscription services (EDVSS) are ascribed. This section 
sustains the importance of understanding this new phenomenon in order to clarify the 
shifts in market trends that mainly underlay the introduction of EDVSS.  
The third part addresses the topics that concur in creating the bases for the theoretical 
background of the analysis. In detail, the literature review is aimed at establishing the 
connection between the co-creative practices and participative environments, as EDVSS 
platforms are. 
The fourth part explores analytically the hypotheses by testing empirically the validity of 
the theoretical concepts with respect to the US population, the only one that currently has 
been given the access to the studied type of service. The analyses are separated into two 
parts: the first one aims at testing the existence of a causal relationship between the 
Part I: Introduction  
Part II: Context of Analysis Part III: Theoretical Background 
Part IV: Empirical Data Analysis and 
Findings 
Part V: Discussion and Conclusions
Introduction 
15 
 
customers’ inclination to co-creative behaviours and the tendency to adopt an EDVSS; 
then, the second attempt to extend an existing framework of attitudinal car-types choice 
to explain the main variables accounting for the variability in the adoption rate of EDVSS.  
In part five, finally the main findings and the managerial implications of the research are 
discussed, conclusions are drawn, and further researches are suggested. 
  Research purpose 
Given the substantial lack of academic contributions in understanding the potential of 
subscription-based services in the automotive industry, the main objective of this research 
project is to initiate the research in the field and obtain sounding results that could be the 
ground for further academic investigations. As an early attempt, the gap is addressed by 
developing a customers’ behavioural analysis. In particular, the elaborate purposes at 
studying the relationship between the concept of co-creation and its applications in the 
automotive industry, attempting to establish a connection between the introduction of 
vehicle subscription services and manufacturers’ co-creative practices.  
The industry analysis and the theoretical framework extrapolated from the following 
sections of the elaborate support the conclusion that, on a theoretical level, might exists 
a connection between the EDVSS and co-creation initiatives, being the former a tool and 
an environment for the latter to be deployed. Therefore, the main question that the 
research is aimed at answering is whether empirically there is sufficient evidence that 
could support this theoretical conclusion.  
In particular, the first question will be the following:  
Q1: Are experience-driven vehicle subscription services attracting co-creators?  
The topic is tackled through the analysis of the causal relationship between the incidence 
in the adoption rate of EDVSS and the tendency towards the participation in co-creative 
practices of potential customers. Technically, the analysis will primarily assess the 
existence of the suspected relationship and secondly will observe the effect of possible 
confounding effects.  
In order to give the research an operative value and practical applicability, a second part 
is developed. In particular, it is attempted to explain the adoption of EDVSS through the 
extension in the application of the existing attitudinal models for car choice. As already 
outlined, the adoption thus will be described as a function of attitudes, personalities,
Introduction 
16 
 
lifestyles (Choo & Mokhtarian, 2004) and car perceptions (Steg, Car use: lust and must. 
Instrumental, symbolic and affective motives for car use, 2005), each one composed by 
several factors, with the purpose of answering: 
Q2: What factors positively impact on the adoption of EDVSS?  
After having determined the required adjustments to extend the attitudinal model for car 
choice to the case of EDVSS adoption, the model is tested with respect to the data 
collected using the covariance-based confirmatory technique of structural equation 
modelling.  
 Research methodology  
The relationship between co-creative behaviour and the adoption of EDVSS, as well as 
the validity test for the explicative model for adoption itself, are addressed through the 
collection of both quantitative and qualitative secondary data and quantitative primary 
data.  
The structural approach initiates with the definition of the main trends in the automotive 
sector, in order to clarify the external environment in which the EDVSS are collocated. 
Information is retrieved from several trusted databases mainly for quantitative 
contributions, while academic papers, specialized industry reports and newspapers were 
deployed to collect mainly qualitative pieces of information.  
To enhance the likelihood of obtaining sounding results, the sample has been selected 
among the US population. This choice has allowed both the use of original constructs, 
that are mainly written and tested in the English language, as well as has limited the risk 
that the constructs wouldn’t be valid, given the fact that the majority of mobility and 
transportation researches are conducted in the US.    
The first part of the analysis is conducted through the deployment of a multiple linear 
regression model to test the existence of the relationship in the scope of exploratory 
research.  
In the second part, covariance-based structural equation modelling is used to test the 
validity of the application of the existing attitudinal model for car choice to explicate the 
adoption rate. This methodology allows observing the goodness of the model with respect 
to the analysed sample.
20 
 
 
CONTEXT OF THE ANALYSIS 
 
 
 
 
 Strategic Choices for the future of automotive  
The automotive industry is encountering a period of profound redefinition, driven 
mainly by external factors. Indeed, regulations and changes in consumers’ habits will 
significantly pull the transition to a new private transportation paradigm.  
Specifically, regulations are mainly targeting the limitation of the automotive industry 
incidence to global carbon emissions. The governments’ aim is to drastically reduce 
the footprint of this industry, forcing the adoption of alternative powertrain technologies 
and the radical dismission of internal combustion engines (ICE). The severe 
restrictions applied to the traditional ICE powertrains will shrink their overall market 
share from 93% of 2017 to the forecasted 68% of 2025, initiating an irreversible 
transformation of the industry (The Boston Consulting Group, 2018).  
Consumers, on the other hand, are expected to constantly increase car usage. In solely 
Europe, it is forecasted an increase of 40% in mileages driven while one-third of total 
mileage will be swept by a shared offer by as late as 2030 (PWC, 2017).  Generally, 
mainly due to the increase in population, the demand for fast, cheap, secure and above 
all individual transportation will strongly be developed worldwide. China is expected to 
become the predominant market for the transformation of the industry, leading to the 
adoption of electric and autonomous vehicles (PWC, 2017).  Concisely, the paradigm 
of the next decade individual mobility is built around four main pillars, namely 
autonomous driving, connected information, electrification of powertrains and shared 
use (McKinsey & Company, 2016).
Context of the analysis 
21 
 
2.1.1. The issue of re-discussing car usage  
Although there is no clear clue on how the future of mobility will look like (Dutzik & 
Baxandall, 2013) and even given the fact that the paradigm of future public mobility is 
going to be drastically different from the one of the 19
th
 century (McKinsey & Company, 
2016), (Urry, 2004), the automobile is going to still play a key role in the mobility 
solution.  
The reasons are quite articulated since car consumption is a complex and 
heterogeneous phenomenon (Schwanen & Lucas, 2011). The main motivation resides 
in the fact that the automobile has given the possibility to redesign people lifestyle in 
the name of flexibility, eventually contributing to substantially increase the 
fragmentation and the individualization of the personal needs (Schwanen & Lucas, 
2011). Overall, the benefits of the obtained flexibility substantially improved everyone’s 
life to the point that a strong lock-in effect opposes cars dismissing initiatives (Urry, 
2004). The lack of viable alternatives that could provide a comparable range of 
coverage is considered as a key factor preventing from the reduction of individual cars 
(Lenntorp, 1977) since it represents the fear of losing car benefits rather than the actual 
automobile itself.  
However, people more than often could be affected by the circumstances where socio-
cultural norms, accompanied with schedule tightness and structural lack of competitive 
alternatives, head to a strong preference for car usage (Schwanen & Lucas, 2011). 
And even when it is not the best choice, it is likely that people will not question 
themselves whether an alternative would be better due to the irrational appraisal of car 
benefits. Pre-discursive and pre-cognitive impulses and motivations stand at the core 
of this biased evaluation, making it become a deep-rooted automatism (Sheller, 2004) 
Ideally, car usage should result from complex and dynamic reciprocal interaction 
between personal factors and external circumstances (Schwanen & Lucas, 2011). The 
final assessment depends on the attributes of the available alternatives, the 
characteristics of the decision-maker, the set of elements that identify the situation – 
namely the type of trip and the specifications of the origin and the destination (Ben-
Akiva, 1985) and the perception of time value (Brownstone & Small, 2005).  
In some cases people can be driven by rationality,  mainly when encountering a strong 
difference in norms, symbolic factors and emotions (Meyer, Levin, & Louviere, 1978),
Context of the analysis 
22 
 
(Louviere, 1981), as well as for effect of attitudinal variables (Recker & Golob, 1976), 
(Koppelman & Lyon, 1981).  
However, people tend to perform biased cost-benefit appraisals due to the 
predominance of irrational and distorted perceptions of the decision maker (Banister, 
1978). The heterogeneity of the different cost components accounts for the main 
contribution to the unreasonableness of the valuation (Lanken, Aarts, Knippenberg, & 
Knippenberg, 1994). Thus, the use of car becomes a script-based behaviour (Gärling 
& Axhausen, 2003) that acts as a routine drastically reducing decision’s efficiency 
(Schwanen & Lucas, 2011).  
2.1.2. From an all-purpose to a fit-for-purpose mobility 
Whether it is true that cars will maintain a relevant role in the next decades, the mode 
of car usage is going to be profoundly re-discussed in favour of new on-demand-based 
paradigms of mobility.  
The global car market is going to constantly grow both in quantities and value over the 
next decade driven mainly by developing countries (McKinsey & Company, 2016). 
Nevertheless, the predominant model of private transportation of the 20
th
 century, 
based on an all-purpose solution, will be increasingly dismissed in favour of flexible 
and tailored solutions. An example is the forecasted 10% of the car sold in 2030 that 
will belong to sharing services (McKinsey & Company, 2016).  
The adoption of new mobility services, as vehicle subscriptions, will be mediated by 
the tensions between demands from a younger generation – more inclined to a 
convenient service – and older generations – sceptical about revolutionizing their 
established habits, namely traditional car ownership (PWC, 2017). Therefore, it 
becomes essential to revise the segmentation criteria to support the advent of 
alternatives to traditional car ownership. It is advised to cluster on the basis of drivers’ 
behaviours, population density, macroeconomic indicators and prosperity (McKinsey 
& Company, 2016). While low-income cities are expected to face a rapid growth in the 
volume of car sold, high-income regions, due to the higher disposable, will lead the 
market penetration for an innovative technology solution and marketing strategies 
(McKinsey & Company, 2016). Thus, to predict the outcome of the transformational 
process, researchers should focus specifically on the richer regions that will drive the 
entire industry.
Context of the analysis 
23 
 
 A change in the industry’s drivers 
2.2.1. A crucial technological transition 
The development of alternatives to traditional internal combustion engines (ICE) 
stands at the core of the forthcoming automotive industry redefinition (McKinsey & 
Company, 2016). Governments and regulators have imposed strict ties to carbon 
emissions such that manufacturers have been forced to develop feasible alternatives 
to traditional ICE powertrains. Even though some manufacturers initiated their R&D 
processes during the 1990s, more than two decades after, the alternatives still lack the 
required strengths that would allow a massive adoption. Electric vehicles represent the 
main solution to drastically reduce carbon emissions at the exhaust pipes, although 
the elevate payback period of the investment represents the main reason preventing 
users from a fast adoption of this new technology. With adequate infrastructures and 
a payback period limited within three years, the introduction of electrified vehicles in 
urban areas would be boosted significantly up to +40% (The Boston Consulting Group, 
2018). In a future of shared autonomous EV, the car use cost will drop by as far as 
54% compared to current private-owned ICE vehicles (The Boston Consulting Group, 
2017), a result that can be achieved only in when investments will be amortised.   
However, the approach to the massive electrification will be gradual in absence of 
durable and concrete incentives. The final adoption scenario will be strongly influenced 
by the opposed forces of regulators and customers, the former aimed at pushing the 
offer and the latter at pulling the demand (McKinsey & Company, 2016). Governments 
should then support the migration between 2020 and 2025, restricting the usage of full 
ICE vehicles while subsidizing the adoption of electric ones.  
This phase is considered essential to the development of a strong economic 
proposition to the customers both allowing companies to further invest to develop more 
efficient solutions and supporting regulators in designing specific norms. The tipping 
point to the adoption of EV would likely happen towards 2025, having the customers 
starting to pull the demand, but only whether the cost-benefits outcome of EV will 
become competitive compared to the traditional ICE offer (The Boston Consulting 
Group, 2018).
Context of the analysis 
24 
 
2.2.2. The need for new revenue streams  
Normally, innovations should be marketed at a premium-price to sustain the recoup of 
the upfront investments (Johne, 1999). However, several early attempts highlighted 
that this is not the case, having the adoption substantially remained stagnating through 
time mismatching the recovery expectations. Full-electric vehicles will account only for 
the 14% of the 109 million units of forecasted sales by 2030, sustaining that, in 
concrete, the transition towards completely green solutions will be extremely slow (The 
Boston Consulting Group, 2018).  
Therefore, manufacturers have increasingly recurred to alternative sources of 
revenues to revitalize their profitability. Currently, car makers are exploring the 
potential of data management revenues opportunities to differentiate their income 
sources. Indeed, vehicles are considered as large platforms that leverage on-demand 
data both from and to external servers, allowing carmakers to provide either a new 
form of mobility and data-driven services.  
No coincidence is the use of subscriptions fees for accessing online services on board, 
for navigation support or scheduled maintenance, as well as the, resell of big data 
collected by the customers. These additional flows will account for ~30% of total 
revenues by 2030 for a total of US$ 1.5 trillion (McKinsey & Company, 2016). By the 
same year, indeed, it is expected that the industry value for private vehicles will almost 
double, from US$ 3.5 trillion of 2016 to US$ 6.7 trillion, mainly driven by the expansion 
of emerging market that will rapidly adopt ICE vehicles (McKinsey & Company, 2016).  
2.2.3. New forms of competition and cooperation 
The new introduction of alternative revenue streams implies an enlargement in the 
competitive environment and therefore a need for adapting both competition and 
cooperation strategies. Several signals suggest that the industry might be subjected to 
a radical redefinition. Car makers are starting to compete in the arena of service-based 
offers, enlarging significantly the boundaries of the industry and increasing the 
complexity by enlarging the front to be covered from the risks of competition – e.g. the 
entrance of mobility providers, tech giants and other new OEMs (McKinsey & 
Company, 2016). For this reason, in the next decades, the automotive industry is going 
to become an essential slice of the individual mobility services arena.
Context of the analysis 
25 
 
Partnerships will represent the main source of competitive advantage in the future 
(McKinsey & Company, 2016). In fact, the redefinition of the industry implies large 
investments that should be coupled with a constant reduction in costs to maintain an 
acceptable level of capital efficiency. Incumbents are expected to intensify the 
partnerships with other OEMs with the purpose of containing the efforts to allow a 
smooth technology transition. Then, cooperative initiatives with software companies 
should be aimed at establishing and capturing a durable competitive advantage over 
direct competitors. Indeed, the market leading role will be assigned to the OEM that 
better implement future mobility services – e.g. including mobility services, advanced 
safety, location-based services, in-vehicle contents, and remote analytics.  
2.2.4. The role of co-creation in establishing a competitive advantage  
During the transition, establish a durable and valuable competitive advantage should 
remain the manufacturers’ priority. Differently from previous times though, the strategic 
process has changed significantly. The market evolution is reaching such a complexity 
that it would be uneconomical and unreasonable to constantly face all the different 
competition fronts (McKinsey & Company, 2016).  
As a result, manufacturers started to acknowledge the importance of relying on an 
external source of knowledge to improve both their efficiency and their effectiveness. 
In a sense, it has to become a structural core approach to innovation (Chesbrough, 
2006), leveraging the different skills and professions of networks that are external to 
the organization to improve the offer and the value proposition for their clients (Füller, 
Hutter, & Faullant, 2011).   
At the same, the socio-cultural meaning of the vehicle is undergoing a profound change 
and it mainly depends on how customers could capture the meaning of the car itself 
(Füller, Hutter, & Faullant, 2011). In this panorama, co-creation – the jointed 
contribution between the company and the customer in creating the final outcome - 
becomes a key tool to understand customers by involving them into the process of 
value creation and could be considered as a systemic requirement for the future 
manufacturers’ strategies (PWC, 2013).