Honda is also planning to release a more affordable hybrid car by 2009, to boost sales among consumers who now find eco-friendly vehicles too expensive.

The hybid engines pioneered by Japanese automakers such as Honda, save fuel costs and have proven to be major hits at a time of soaring oil prices.

Honda also showed the CR-Z concept car, a lightweight sports model with a hybrid engine, at the Tokyo Motor Show.

"We started with premium cars and gradually expanded the portfolio. With the entry into the compact cars, we will further strengthen our position," Honda Motor Co CEO and president Takeo Fukui said on the sidelines of the Tokyo Motor Show.

Fukui said Honda could use India as an export hub for some select models if "it complemented with other global manufacturing places such as Thailand."

Honda Siel Car India (HSCI), the company''s joint venture with the Sriram group, is currently expanding capacity to one lakh units per year.

Besides its current plant at Greater Noida, the company is also setting up a greenfield facility at Rajasthan, with an investment of Rs1,000 crore. The new facility would have an initial capacity of 60,000 units.

"Once the facility is ready, we will roll out the `Jazz'', with a 1.2 litre engine." HSCI president and CEO M Takedagawa said.

The Nikkei business daily, quoting unnamed company sources, said that Honda would launch the lower-priced hybrid in 2009 across the world, including Japan, the US, Europe and China.

With the new model, Honda hopes to raise global hybrid sales 10 times from last year''s figure, reaching up to 500,000 cars by 2010, the newspaper said.

The newspaper said Honda aimed for the hybrid to cost about 200,000 yen ($1,800) less than a conventional car. The price gap now stands at about 500,000 yen.