The Strait of Hormuz Heats Up: Will Indonesia's Car Market Be Affected?
If tensions endure for a protracted period, demand from the region is at risk of a sharp decline as distribution costs rise and demand falls as market sentiment shifts toward seeking security.
Jakarta (ANTARA) - Iran has officially closed the Strait of Hormuz, a vital route frequently used as a conduit for global oil distribution, citing security concerns tied to the war between the Islamic Republic and the United States and Israel that has escalated since Saturday, 28 February.
About 20-30 percent of global oil trade passes through the Strait of Hormuz each day.
Indonesia, still dependent on global oil supply, is expected to be affected by the geopolitical tensions.
Indonesia is no longer a net oil exporter. Domestic demand is largely met through imports, making the national economy sensitive to energy price spikes.
So with the Strait of Hormuz closed, what impacts might be felt by industries in Indonesia, particularly the national automotive sector?
When oil prices rise, the first pressure is felt on the rupiah and energy subsidy burdens. If subsidies swell or domestic fuel prices rise, consumer purchasing power could be affected.
On this basis, the automotive industry could be further pressured if the hot conditions persist for a sufficiently long period.
Automotive expert from the Bandung Institute of Technology, Yannes Martinus Pasaribu, said that if the tensions persist, it will have an impact on oil prices that could reach around 100 US dollars per barrel.
“Dampaknya langsung terasa pada industri otomotif Indonesia, karena biaya produksi bisa naik lebih dari 5 persen, terutama akibat kenaikan biaya energi, lonjakan ongkos logistik, serta semakin mahalnya parts impor perakitan mobil di Indonesia akibat naiknya tarif pengiriman,” he said, when contacted by ANTARA on Friday.
Indeed, tensions caused by external parties do not automatically bring down the automotive industry. However, such events confer a ‘stunted’ growth on the sector due to subdued purchasing power.
Looking back at the history of events that have slowed the automotive industry, there have been three major episodes.
From the global financial crisis of 2008, the COVID-19 pandemic, to the fuel price adjustments in 2022.
During the 2008 global financial crisis, economic weakness and exchange-rate volatility led to a significant drop in national car sales compared with the previous year. Consumers held back purchases due to economic uncertainty.
During the COVID-19 pandemic in 2020, the impact was much deeper. Domestic car sales fell by almost 50 percent versus 2019. Economic activity stalled, purchasing power weakened, and financing became tighter.
Meanwhile, in 2022, when domestic fuel prices were adjusted, car sales did not collapse, but growth was restrained and consumers became more selective, especially in the segment of vehicles with higher fuel consumption.
From these three periods, a single pattern emerges: whenever economic pressure hits purchasing power, the automotive industry also experiences a slowdown.