Ahmedabad/Mumbai: Japan’s Honda Motor Co. is planning to invest ₹ 4,000 crore to build an automobile manufacturing plant at Vithalapur in Gujarat, its third in India, according to three people with knowledge of the company’s plans.

The new factory will have a capacity to manufacture about 100,000-125,000 cars a year, according to two state government and one industry official. They declined to be identified.

Honda is in talks to buy 150 hectares of private land in Vithalapur-Manpur area near Mehsana, one of the two government officials cited above said. A component manufacturing plant is also on the cards, according to a proposal submitted by the car maker to the state government. Mint has reviewed a copy of the investment proposal made by Honda Cars India Ltd to the Gujarat government.

“Honda is actively looking for private land in Vithalapur-Manpur area for the new factory," said a city-based realtor in the know of the development. He too did not wish to be named.

If Honda decides to build its third car plant in Gujarat, the company will become the second-largest Japanese carmaker in India by capacity after Maruti Suzuki India Ltd.

Honda also happens to be the second Japanese company that has been planning to build a car factory in the Vithalapur area in Gujarat after Suzuki Motor Co., the parent of Maruti Suzuki.

Honda will have made half-a-million cars in India by the beginning of next year, the second largest figure after Maruti Suzuki’s, said Amit Kaushik, principal analyst at IHS Automotive, sales forecasting and market research.

“We see Honda India as a very strong and stable contender in the future," said Kaushik.

A spokeswoman for Honda Cars India declined to comment on the proposed factory in Gujarat, but said that the company has just begun production at its second plant in Tapukara in Rajasthan in February. She said the company’s total installed production capacity is 240,000 per annum between this plant and the one in Greater Noida (without running both plants at capacity).

“Our current focus is on generating more demand, rather than planning expansion of production capacity," she said.

Honda Motorcycle and Scooter India Pvt. Ltd, the two-wheeler making arm of the Japanese automaker, has acquired about 100 hectares of land in Vithalapur for a new unit in which Honda plans to invest ₹ 1,100 crore. It will start production in fiscal year 2016, the company said in February.

Vithalapur shot to the limelight when Maruti Suzuki bought about 200 acres of private land here for setting up a new factory. The area lies close to Hansalpur where Maruti Suzuki will be setting up its first factory outside Harayana. Maruti has plans to make as many as 1 million cars in Gujarat in a phased manner.

The company has said in the past that they (along with the vendors), plan to invest ₹ 18,000 crore in Gujarat in the long run.

Car sales in India, Asia’s third-largest market, showed signs of recovery in the month of May after posting the steepest decline in 12 years for 2013-14. A sluggish economy coupled with high cost of ownership had led to car sales falling by 6.5% to 2.5 million units in the year ended 31 March.

However, the local carmaking unit of Honda has managed to increase sales introducing new models including the Amaze and the new City sedans.

In a depressed market, Honda sold 1.35 lakh units in 2013-14 compared with 73,483 units a year ago, according to Society of Indian Automobile Manufacturers, increasing its market share to 5.37% from 2.76% a year ago in the passenger vehicle market.

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