Weakening Rupiah Raises Concerns for Automotive Industry
JAKARTA — The weakening of the Rupiah exchange rate against the US Dollar is becoming a focal point of concern for the national automotive industry. This condition is assessed to potentially affect production costs and the retail prices of vehicles in Indonesia.
Despite the volatility, several Korean car manufacturers claim they have not yet implemented vehicle price adjustments amidst the weakening Rupiah. Rendy Pratama, Head of Marketing at Kia Sales Indonesia, stated that the company is continuously monitoring the dynamics of the Rupigu exchange rate periodically.
“For now, we are still monitoring the dynamics of the Rupiah’s movement regularly, but we do not deny that this volatility could impact Kia’s business in Indonesia,” Rendy told Kompas.com. He emphasised that in the automotive business, cost structures do not change instantly following daily fluctuations in the foreign exchange market. He noted that the company employs inventory planning mechanisms, long-term contracts, and hedging strategies to mitigate exchange rate volatility risks.
Rendy explained that Kia will continue to evaluate the impact of the Rupiah’s weakness on vehicle selling prices in Indonesia, focusing on providing products at appropriate prices to maintain customer satisfaction.
Similarly, Fransiscus Soerjopranoto, Chief Operating Officer of HMID, stated that decisions regarding price adjustments will consider several factors simultaneously, including fuel prices and currency exchange rates. “It depends on the rise in petrol or fuel prices. If fuel prices rise significantly and the currency exchange rate also rises, we will combine all those factors into the final car price,” he said.
He added that players in the Indonesian automotive industry are currently striving to revitalise the sector, with some launching new products and offering more attractive benefits to customers, including Hyundai.
The weakening of the Rupiah has the potential to impact the automotive industry because a significant number of vehicle components rely on imported raw materials and US Dollar-based transactions. Furthermore, exchange rate changes can also affect logistics costs and the price of vehicle spare parts.