Potential of AI for service performance of manufacturers: Analytical and empirical insights

•Whether a manufacturing enterprise should improve service performance through AI technology and how to sell products and AI services.•Summarize the service-oriented transformation path through case studies of three automotive manufacturing enterprises.•Manufacturers should not offer AI services when the quality-cost coefficient of services is low. The sales model for products and AI services depends on the quality-cost coefficient and the impact of AI on the service.•The study provides theoretical support and practical basis for the service-oriented transformation path of manufacturing enterprises. In the era of the digital economy, the rapid development and integration of next-generation information technologies, particularly Artificial Intelligence (AI), have fundamentally altered the operational paradigms and business models of the manufacturing sector. The incorporation of AI elements not only technically but also strategically affects various facets of manufacturing, with relevance to service performance. This study analyzed the effect of AI technology on service quality and manufacturers’ strategic decision-making using a mathematical model. Our results indicate that manufacturers should focus on the quality-cost coefficient of services and the impact of AI technology on services, regardless of whether they adopt AI. Importantly, manufacturers should focus on the product value, considering services as value-added components. Subsequently, manufacturers should avoid excessively improving service quality as this could make it difficult to profit from over qualified services. Finally, manufacturers lack incentives to provide low-quality services when determining the sales model for products and services. Manufacturers can maximize profits by continually striving to improve service quality. We studied successful AI-driven upgrades and proposed practical transformation modes as references. This study provides an important reference for guiding AI-driven service innovation practices in manufacturers.