Honda, in Green Race, to Spend $1.5 Billion on New Plants

Two new plants will produce a less expensive hybrid.

Honda Motor said May 21 it will spend $1.5 billion on two new plants as it steps up production of fuel-efficient cars, including a cheaper hybrid due to be launched early next year. Honda will build a plant making fuel efficient engines in 2009 and a new manufacturing plant in 2010, both in Japan, Honda Motor president Takeo Fukui said.

Honda confirmed it was on track to introduce in early 2009 what it describes as an affordable hybrid. It is aiming for initial annual sales of 200,000 of the compact five-door passenger size car. Honda also plans to introduce a hybrid version of its Fit compact car along with a sporty hybrid and a new petrol-electric version of its Civic. It is targeting total sales of the four models of 500,000 vehicles a year by around the mid-2010s, Fukui said. He said Honda wanted to move hybrids on from the "current image-oriented stage" to one of mass appeal.

Along with rival Toyota Motor Corp., Honda is a pioneer of hybrid-engine cars, which are attracting growing interest at a time of soaring oil prices. But the petrol-electric cars are still more expensive than conventional cars and represent just a small share of the total vehicle market. Honda aims to reduce the premium customers have to pay for a hybrid to about 200,000 yen (US$1,800), from as much as 500,000 yen now, Fukui said.

Toyota has taken a lead in sales of hybrids. It has sold more than one million of its Prius -- the world's first mass-produced hybrid -- since its launch about a decade ago.

Honda also said that it was considering releasing cheaper compact cars than its current models amid fierce price competition in fast-growing markets like India. The car would "be equipped with the full functions of a car and at the same time offer price competitiveness," he said. Fukui has previously said Honda is staying out of the race to develop ultra-cheap cars, hoping motorists in fast-growing markets like India will pay more for safer, greener vehicles.

India's Tata earlier this year unveiled a $2,500 car, the world's cheapest, which is set to hit the roads there by October. French-Japanese partners Renault and Nissan aim to launch a similarly priced vehicle by early 2011.

Copyright Agence France-Presse, 2008

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