Stronger Rupiah Helps Curb Automotive Price Hikes, Economist Says
Jakarta (ANTARA) - Economist Josua Pardede, an alumnus of the University of Indonesia and the University of Amsterdam, believes the strengthening of the rupiah exchange rate offers a measured sense of optimism for the national automotive industry, potentially helping to hold back price increases in the near term.
“The strengthening rupiah gives room for optimism for the automotive industry, but that optimism needs to be very measured and not immediately translated as a strong recovery in demand,” Josua said when contacted in Jakarta on Wednesday.
The deputy chairman of the Indonesian Chamber of Commerce and Industry’s (Kadin) Standing Committee II for Global Economic Strategic Studies said a stronger rupiah can help reduce import cost pressures for various automotive industry needs, ranging from components, completely built-up vehicles, batteries, spare parts, metal raw materials, and vehicle electronics, to logistics costs which are largely linked to the US dollar.
He explained that for producers and brand-holding agents that still have high import content, the rupiah’s strengthening helps maintain business margins while holding back increases in vehicle selling prices.
Despite being a breath of fresh air, Josua assessed that the rupiah’s appreciation will not automatically cause vehicle prices to fall or market demand to surge in the short term.
The impact on production costs, he said, usually takes time because the industry is still using old stock, previous purchase contracts, ongoing logistics costs, and hedging strategies put in place before the rupiah strengthened.
Moreover, vehicle prices are also influenced by various other factors such as financing costs, taxes, incentives, labour wages, raw materials, promotions, and the level of market competition.
“So, a stronger rupiah is more realistically used to hold back price increases, not to immediately lower prices drastically,” explained the observer who also serves as Chief Economist at PermataBank.
From the consumer side, Josua assessed that the rupiah’s strengthening is a positive sentiment, but not yet strong enough to change vehicle purchasing decisions.
According to him, the decision to buy a car is more determined by the ability to pay down payments and instalments, job security, fuel prices, and confidence in household economic conditions.
Josua noted that sales data which increased year-on-year but declined month-on-month indicates the market is improving compared to last year, but has not fully recovered.
“This means the market still needs to be managed with careful pricing, financing, and stock strategies,” Josua said.
It is known that the rupiah exchange rate on Monday (15/6) strengthened by 82 points, or 0.46 percent, to Rp17,778 per US dollar compared to the previous close of Rp17,860 per US dollar. Previously, the rupiah exchange rate had also weakened to around Rp18,000 per US dollar. As of Wednesday afternoon, the rupiah exchange rate reached Rp17,758 per US dollar.