Indah Ayu Pujiastuti, Jakarta – Rising tensions around the Strait of Hormuz, with potential spillover into the Red Sea, could increase Indonesia's automotive production costs by 2-4%, as higher oil prices ripple through supply chains and logistics, according to industry analysts.
Automotive observer Yannes Martinus Pasaribu from the Bandung Institute of Technology (ITB) said data from the Energy and Mineral Resources Ministry shows that around 20-25% of Indonesia's crude oil supply passes through the Strait of Hormuz.
If disruptions escalate, global oil prices could surge to as high as $100 per barrel in a worst-case scenario. Higher energy costs would increase the government's subsidy burden and potentially weaken the rupiah.
Yannes said the spike in oil prices could raise national automotive production costs by about 2-4%, driven by higher distribution expenses and more expensive imported components. These pressures would eventually push up vehicle prices in both domestic and export markets.
He added that weakening middle-class purchasing power, the largest consumer segment in Indonesia's automotive market, could further strain the industry. Around 70-80% of car purchases in the country rely on financing, meaning rising interest rates and the risk of higher non-performing loans could dampen demand.
"As a result, the national automotive sales target for 2026 could be revised downward by around 3-7% if the conflict persists for an extended period," Yannes said.
Beyond oil flows, a blockade of the Strait of Hormuz would also disrupt roughly 30% of Indonesia's LPG imports. Rising oil prices would likely increase costs for key raw materials such as chemicals, plastics, and polymers used in vehicle components.
Yannes warned that semiconductor supply chains could also face higher prices and delivery delays due to logistics disruptions and potential airspace restrictions in the region. Imports of steel, plastic-polymer materials, machinery, and completely knocked-down (CKD) components may also become more expensive.
At the same time, disruptions in gas supply could trigger food inflation, further weakening household purchasing power.
"The combination of pressure on production costs and liquidity poses a serious challenge to the sustainability of the industry," he said.
The Middle East remains an export destination absorbing tens of thousands of vehicles annually out of Indonesia's total car exports of 518,212 units. While not the largest market, disruptions in the region could still affect factory utilization in Indonesia.
Yannes suggested that diversifying export markets would be key to mitigating the impact. ASEAN remains the largest export destination, followed by Latin America, while new opportunities could emerge in South Asia and Africa.
He said the government should strengthen collaboration with automotive associations to expand trade diplomacy through free trade agreements in non-Middle Eastern markets to secure long-term export volumes, although such adjustments would require time and logistics contract changes.
Domestically, he urged stronger implementation of local content (TKDN) policies to reduce reliance on imported components that are sensitive to currency fluctuations. Brand-holding agents (APM) should also consider currency hedging strategies and secure long-term semiconductor supply contracts.
Strategically, the government could redirect energy subsidies toward accelerating vehicle electrification in line with the national roadmap to reduce future oil imports and revive programs converting internal combustion vehicles into electric vehicles.
Financing institutions may also need to introduce adaptive credit schemes, including targeted interest subsidies and flexible down-payment structures, to sustain domestic demand amid inflation and rising logistics and insurance costs, Yannes said.
Meanwhile, Toyota Motor Manufacturing Indonesia President Director Nandi Julyanto said the conflict in the Middle East has begun to disrupt vehicle exports to the region, mainly due to shipping and logistics issues.
"The main problem is logistics; shipping has been disrupted. However, for now, we are continuing production normally according to orders," Nandi said.
Toyota exports vehicles from Indonesia to more than 100 countries. Nandi noted that the Middle East currently accounts for around 17-20% of the company's exports, but the manufacturer still has other key markets in ASEAN and Latin America.
With the Middle East situation uncertain, Toyota plans to continue exploring new markets, particularly across the Global South, including Latin America and Africa.
"We are studying new markets, especially in the Global South, such as Latin America and Africa, where the market structure and vehicle models are similar to ours," Nandi said.
He remains optimistic that Toyota's export target of 300,000 units in 2026 can still be achieved.
Source: https://jakartaglobe.id/business/hormuz-tensions-threaten-indonesia-auto-industry-with-24-cost-surg