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Business contract hire market stability and increased demand for salary sacrifice have been predicted for 2023 by a BVRLA report.
This optimism comes despite vehicle supply problems having been joined by rising costs and increasing energy prices as major challenges facing the rental and leasing sectors.
The Industry Outlook Report is based on a survey of BVRLA members, among whom, when asked about the business contract hire market's prospects for 2023, there was a reasonable level of confidence, with 43% expecting no change in demand over the next 12 months, and 28% expecting growth.
Optimism is higher for salary sacrifice, in which 47% expect growth, even compared with already strong demand during 2022, with the long-term security of confirmed low BIK company car tax rates for EVs until 2028 cited as a factor.
When respondents were surveyed about the issues facing the sector, 84% still believed that vehicle supply would present one of their biggest three challenges in 2023, including 78% of those from the leasing industry and 92% of those from the rental industry.
When asked when car supply levels would return to pre-Covid levels, just 32% of those surveyed believed this would take place in 2023, while 52% thought it would not happen until 2024, and a further 9% said it would never happen.
The supply problems are leading to longer vehicle lead times, and 70% of survey respondents said that pricing uncertainty was a major cause for concern from this, while 58% said they were resigned to the fact that longer lead times were now standard.
51% also said a knock-on effect from the situation was running an older fleet, through both official and unofficial contract extensions, raising concerns about higher maintenance costs as vehicles age.
The research found that some leasing companies were responding to the problem by ordering batches of vehicles in popular specs without having confirmed customers signed up for them, with the demand from fleets and salary sacrifice drivers being such that they had little difficulty finding customers for the vehicles when they arrived.
In addition, leasing companies were also found to be encouraging customers to widen the range of manufacturers' vehicles they considered - a process helped by electrification, with brands such as Kia, Hyundai, MG, Polestar, and Tesla now part of mainstream fleet.
Rising costs and energy prices were cited together as the industry's clear second-placed concern for 2023, named by 78% of leasing respondents and 67% from rental.
The cost of finance was named as a concern by 48% of leasing respondents and 25% from rental, and low business and consumer confidence was named by 41% from leasing and 33% from rental.
BVRLA chief executive Gerry Keaney said: "The last twelve months have been punctuated by political chaos, huge regulatory realignment, a once-in-a-generation surge in inflation and immense supply chain challenges. Many of these challenges will continue into 2023.
"Our Industry Outlook Report portrays a sector as pragmatic, positive and professional as ever. The findings show that BVRLA members are adjusting to new market realities, focussing on their growth opportunities and addressing their compliance priorities while making major leaps forward in the use of technology.
"We go into 2023 with a great deal of optimism, ready to address these issues head on. If the last few years have shown us anything, it is how resilient and adaptable our sector can be."
The report was launched at the BVRLA's Industry Outlook Conference, which returned for the first time in three years.
During a panel discussion about the report, Zenith fleet consultancy director Claire Evans discussed how environmental concerns were becoming a bigger part of fleet managers' jobs.
She said: "I think the role of the fleet manager has evolved once again - you almost have to be a sustainability expert alongside a vehicle expert these days, and what we do with our customers a lot now is look at what their reporting needs are for their business.
"It might not be regulatory at the minute, but certainly our customers are looking to represent their business in a certain way and having a strong ESG agenda is important to them.
"It's looking outside of regulation, to what's your role within your business from a reporting perspective and what do you need."
During the discussion panellists were also asked how much demand they were seeing for EVs in the short-term rental market, with Enterprise assistant vice president of fleet strategy for the UK and Ireland Nigel Davies saying that this was currently limited.
He said: "We are not seeing the demand. If you don't have the [low company car tax] BIK argument, why would someone rent an EV that's more expensive, and they may consider more challenging for them to go out and use?
"With short-term daily rental people don't understand [EVs] and they won't want to rent them. We need to be looking at how rental can support the uptake of EVs."
Among the other speakers during the conference was BVRLA head of policy and public affairs Thomas McLennan, who said that the introduction of clean air zones to the UK had not yet been as significant a development as had been feared.
He said: "Clean air zones haven't quite had the impact that I think many people thought there would be, where we would have tens of them by now and they would all be banning private cars etc.
"That hasn't happened, but what we have seen is a major expansion in the London ULEZ, we have seen signalling from the Mayor of London of the direction he wants to take things, and as is often the case that will echo throughout the country.
"We will see other mayors wanting more control over local transport matters and how that plays out can potentially impact some things like car clubs and the rental space."
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