Car Honda studying India-specific car to be designed and built locally

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Honda studying India-specific car to be designed and built locally

NEW DELHI (Reuters) - Honda Motor Co is looking at the possibility of building a small car specifically for India, a top company official said on Tuesday, aiming to gain a bigger share in the world's fifth-largest car market.

The car would be the first to be developed at Honda's local research centre and will be positioned above small, cheap entry-level models, such as Maruti Suzuki's Alto and Wagon R, Hironao Ito, senior vice president at Honda Genbetsu India, the R&D arm, said.

"Some specific model for India is necessary," Ito told Reuters, though he refused to give details on the type of car the company envisaged or its likely launch date.

India's car market is dominated by Maruti Suzuki and Hyundai Motor Co <005380.KS>, which have strong portfolios of locally-developed cars built using parts from domestic suppliers, allowing them to price the vehicles competitively.

Honda, whose City model is India's top-selling sedan, had a 7.2 percent share of the passenger vehicle market in the April-November period, industry data showed. It also sells the Amaze compact car, CR-V sport utility vehicle and Jazz hatchback.

The study by Honda is likely to lead to the development of a small hatchback that will be produced in India and exported to other markets, according to consultant IHS Automotive associate director Puneet Gupta. IHS expects Honda to launch the vehicle around 2020 and sees production of 150,000 units a year, of which 50,000 will be for export.

Development of the platform and engine will be supported by the parent in Japan, but the exterior and interior can be designed and developed locally, said Ito.

Honda's decision to begin the feasibility study was prompted by a shift in car-buying preferences with consumers looking beyond basic, no-frills cars, said Ito. A higher level of localisation also supported the decision.

Honda already procures 80 percent of its parts from suppliers based in India.

"The market has also shifted to slightly bigger cars," Ito said. "Our strong point is that higher segment, and market growth is matching that."