Global Fossil Fuel Crisis Provides Golden Opportunity for Indonesia's Automotive Industry to Accelerate Electric Vehicle Transition
JAKARTA – Global geopolitical tensions impacting fossil fuel energy prices are expected to influence the direction of automotive industry development, including in Indonesia.
Rising global oil prices could make operating costs of petrol-powered vehicles significantly more expensive. Yannes Martinus Pasaribu, automotive observer from Bandung Institute of Technology (ITB), stated that amid this fossil fuel crisis, Indonesia’s automotive industry has found a golden opportunity to accelerate the transition to electric vehicles.
“If fuel prices increase, the operational cost of EVs will become many times more competitive compared to conventional internal combustion engine (ICE) vehicles,” said Yannes.
These conditions could drive a significant rise in crude oil prices over a relatively extended period. “In a scenario of prolonged Middle Eastern conflict, similar to the current situation between the US-Israel and Iran, disruptions to the Strait of Hormuz could potentially drive global oil prices well beyond USD 120 per barrel, as global strategic reserves diminish and competition among nations to secure physical supply intensifies,” Yannes explained.
According to him, the impact of rising global oil prices could also be felt in the domestic market. Although the government continues to restrain certain fuel prices through subsidies, global pressures could potentially influence domestic pricing policies.
“In Indonesia, whilst Pertalite petrol prices currently remain stable at Rp 10,000 per litre thanks to subsidies, potential price adjustments for Pertalite resulting from global pressures will make operational costs a primary determinant in vehicle purchasing decisions,” he stated.
Yannes believes that in such circumstances, electric vehicles possess advantages as they offer higher energy efficiency and lower long-term operational costs. This factor could encourage rational consumers, including first-time car buyers, to consider electric vehicles.
According to Yannes, the combination of EVs’ superior energy efficiency and significantly lower operational costs will remain key for rational consumers, including first-time car buyers, to switch to transportation modes offering long-term operational expenditure efficiency amid the ongoing global fossil fuel energy volatility.
However, this depends on Chinese entry-level EVs maintaining prices within a range 10-15% higher than conventional low-cost green car (LCGC) segment vehicles. “As long as electricity prices do not rise sharply,” he cautioned.