Iran-Israel-US Conflict Could Pressurize Indonesian Automotive Exports

Jakarta – Geopolitical tensions in the Middle East region are viewed as not only impacting the global energy and logistics sectors, but also potentially affecting the performance of Indonesia’s automotive export industry.

Automotive observer and lecturer at the Bandung Institute of Technology (ITB), Yannes Martinus Pasaribu, stated that disruptions to international shipping routes could directly impact the distribution of vehicles from Indonesia to various destination countries.

According to Yannes, from an export perspective, if the situation persists, Indonesia could lose direct access to approximately 5.4 per cent of its export market share.

“Around 28,000 units, particularly to Saudi Arabia and the United Arab Emirates, as a result of security risks and maritime blockade in the Strait of Hormuz,” said Yannes when contacted by Kompas.com recently.

“Meanwhile for other major markets, such as the ASEAN and Latin America markets, although the shipping routes remain safe, there will be an increase in distribution costs and maritime insurance premiums which ultimately could raise the landed cost of vehicles in destination countries,” Yannes said.

According to Yannes, the increase in distribution costs could impact the final price of vehicles in export destination countries.

Yannes added that this risks reducing the competitiveness of Indonesian products compared to local or regional competitors which have more efficient cost structures.