The car is supposed to counter the likes of Maruti Suzuki Swift and Hyundai Getz, premium-end hatchbacks, as Aoki subtly said, "We cannot make a car without Honda-like characteristics."
About the viability of making a $3,000 car that Renault-Nissan plans to market in India, Aoki said personally he would be surprised. Currently, the cheapest car that Honda makes is priced at $9,000 with a 660 cc engine that is sold in Japan.
"Definitely our aim with the small car is to qualify for the excise duty benefits," said Masahiro Takedagawa, president and CEO, HSCI, while clarifying that the car would be primarily for domestic sale.
The new 600-acre facility, which envisages an initial investment of Rs 1,000 crore (Rs 10 billion), will have an initial annual capacity of 60,000 units, which will be later scaled up to 2,00,000 units.
The plant, besides manufacturing the small car, may also produce existing models to lessen load on the 150-acre Greater Noida plant. The company said the plant would profit from its proximity to the Mumbai-Delhi freight corridor.
About the adverse impact of rising input costs on profits, Aoki said, "We may revise our earlier forecast of 3 per cent dip in bottom line during the announcement of the first quarter results because of the favourable impact from a weakening yen."
Honda currently derives more than 70 per cent of its revenue from the US market, which will give greater returns on exports because of the strong dollar.
The company is expanding its capacity at the Greater Noida plant to 1,00,000 units a year and plans to sell 1,50,000 units by 2010. Aoki said the new car would have a localised content of 90 per cent against the City and the Civic's 80 per cent and 78 per cent, respectively.
On the company's foray into the diesel segment in India, Takedagawa said the company was studying the possibility of such a venture. Honda also said although the North American market was the most crucial, it is now diverging into Europe, Asia and even South America.