Honda Siel Cars India, which makes Honda cars in India, will cut production at its Greater Noida (near Delhi) facility, Honda Siel India, and postpone capacity expansion at its second plant in Tapukara, Rajasthan as sales sag.

''Addition of new capacity, initially scheduled for Q4 of 2009, has been deferred in view of the current economic slowdown, which has impacted the automobile industry, resulting in a drop in demand,'' a company release quoted Takeo Fukui, president and CEO, Honda Motor Co, as saying.

''While work on the shed is still continuing and structures will be ready, installation of equipment will not be happening,'' the official said.

The company had proposed initial investment of Rs1,000 crore at the Rajasthan plant, of which Rs600 crore had already been used.

''HSCI is closely monitoring the market situation and will adjust monthly production volumes to respond promptly to market demands while ensuring operational efficiencies and low inventory levels,'' he added.

Fukui said the company has taken various swift and flexible measures to counter the sudden and expansive weakening of the marketplace in all business areas.

Honda Siel Cars India decided to reduce production at its Greater Noida plant in view of the negative growth in the Indian automobile industry and in the interest of maintaining lean operations, it said.

HSCI had planned to set up a second plant in Rajasthan with an initial capacity of 60,000 units, while it expanded capacity at its Greater Noida facility to one lakh units annually.

Honda had earlier announced a reduction in the price of its various models by Rs19,000 to Rs31,000, except for the Honda CR-V, which is a fully imported unit.

The prices have been revised following the reduction in the central value added tax (CENVAT). The new prices will be effective 8 December 2008.

HSCI was considering a price increase for Honda cars from January 2009, due to cost of imports because of the weakening of the rupee against dollar and Yen.