Consumers looking to have a car in Houston typically have had only two options: Buy or lease. Now, there’s a third option.

Nissan this week launched a monthly subscription service in Houston that allows subscribers to rent a variety of vehicles, starting at $699 per month. Subscribers of Nissan Switch, a program thus far only offered in Houston, can change out their vehicles as often as daily, driving an economical electric Leaf sedan during the work week and switching to a zippy GT-R sports car or a spacious Armada SUV for a weekend trip to the Hill Country.

“Consumers want more options and more flexibility,” said Erik Gottfried, Nissan North America’s director of business development and strategy. “There’s a shift happening and we need to be responsive to our customers.”

The subscription model, once reserved for newspapers and magazines, is increasingly transforming the way Americans consume music (Spotify), TV shows (Netflix), software (Adobe) and even razors (Dollar Shave Club). Now, the business model, in which consumers pay a recurring fee for access to a product, is entering the realm of automobiles.

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Automakers — including Audi, Cadillac, Lexus, Nissan, Porsche and Volvo — as well as startups such as Clutch Technologies, Flexdrive and Freshcar — are test-driving vehicle subscriptions, filling a gap in the market between short-term car sharing and rentals and longer-term leases and purchases. Monthly subscriptions from major automakers range from around $700 per month to upwards of $3,000 per month.

In Houston, Nissan joins Volvo in offering subscriptions. Care by Volvo, launched a couple of years ago, involves a two-year agreement that starts at $700 per month.

Ride-sharing response

Automakers are turning to subscription services to attract Millennials who, unlike previous generations, have eschewed car ownership in favor of ride-sharing services.

More than 16 million vehicles are forecast to be part of subscription services by 2025, according to Frost & Sullivan, a California-based market research firm.

“We have a number of customers, who skew younger, that are not looking for a heavy commitment like a lease or a purchase,” Gottfried said. “We want to offer a mobility service that meets these customers’ needs.”

Subscription services are also aimed at motorists who don’t want to deal with the hassles of car ownership or be locked into multi-year lease contracts. Other potential subscribers include car enthusiasts, temporary residents and visitors, Gottfried said.

“There’s a market for people who are in Houston for a period of time where subscriptions make more financial sense instead of buying a car,” he said.

Test market

Nissan Switch, which launched this week at the Central Houston Nissan dealership, offers two levels of monthly subscriptions. The $699 “Select” level includes the Altima, Rogue, Pathfinder and Frontier, and the $899 “Premium” level includes the Leaf Plus, Maxima, Murano, Armada, Titan and the 370Z. Premium level subscribers can also opt to rent a GT-R for $100 per day.

Subscribers must pay a $495 membership activation fee. The subscription includes motor insurance, roadside assistance and regular maintenance. Subscribers can use a mobile app, powered by Clutch Technologies, to sign up and switch vehicles, which are cleaned and can be delivered or picked up at Central Houston Nissan.

The dealership, off the South Loop, has a fleet of 51 vehicles set aside for the subscription program. Subscribers have a 2,000 mile per month limit, and must adhere to certain rules, such as no smoking or loose pets in the vehicles.

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Nissan chose to launch its subscription service in Houston in large part because of its size and diverse demographics, Gottfried said. Central Houston Nissan, which completed a $50 million expansion last year, is the Japanese automaker’s largest dealership in the U.S., and ranks No. 5 nationally in terms of sales volume.

Gottfried declined to share how many subscribers have signed up so far, only to say it’s in the double digits after two days. The automaker plans to run the pilot program for at least six months, after which it will evaluate the service.

Questions remain

Not everyone in the automotive industry is sure that subscriptions have staying power.

Earl Hesterberg, chief executive of Group 1 Automotive, said he is skeptical of the subscription model. The Houston-based company’s Dallas-area and Miami dealerships are participating in Audi’s subscription pilot program, but few consumers have signed up.

“There just aren’t very many people,” Hesterberg said. “It sounds like a good idea, but people don’t like to pick their stuff up and change vehicles all the time.”

Moreover, Hesterberg said, he doesn’t think the subscription model will work in the long run because of the depreciation of vehicles. Still, Group 1 plans to stay engaged in subscription models to see if the trend catches on, he said.

“Once you put a license plate on a vehicle and it’s in service, you better keep that vehicle moving,” he said. “Just like Hertz or Enterprise, they can’t have their cars sit around. They’ve got to be out and being used.”

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Fernando Somoza, Central Houston Nissan’s president and managing partner, said he is keenly aware that subscriptions — similar to the rise of e-commerce, ride-sharing platforms and autonomous vehicles — may disrupt the automotive industry, threatening dealerships’ very existence. But he said he believes subscriptions will play a bigger role in the future of automotive retail.

“Not all consumers will subscribe, but definitely, it’s the way of the future,” Somoza said. “You get concerned obviously because it’s not what we’ve done, but at the end of the day, we have to become good at what consumers want. There’s no running away from the trends in the economy.”

paul.takahashi@chron.com

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