Honda Siel Cars India (HSCI) has launched the third generation City sedan - following the emerging markets model's recent global debut in Thailand.

HSCI also plans an Indian R&D centre, Honda's seventh across the globe.

"India is an important market for Honda. As the market matures, bringing the R&D function into the market becomes very important," said Honda Motor president and CEO Takeo Fukui.

Fukui said the City - the outgoing generation was sold for several years - had been the brand's most successful model in India, which was also the largest market for the car.

The new one is priced from INR770,000 (GBP9,300; $US16,400), INR 80,000 above the old model and the next step would be manufacturing the car in India using locally purchased components.

Following the implementation of a free trade agreement (FTA) between India and the Association of Southeast Asian Nations (ASEAN), the company also plans to source components from India for its assembly plants in that region.

"The FTA between India and ASEAN countries will create new opportunities for our operations in India, especially in sharing components. With the FTA, lot of components can be sourced from India and there will be a lot of possibilities for Indian vendors to supply to our global operations," Honda Asia president and CEO Fumihiko Ike said.

The company also plans to add a small car to its range, smaller than its existing Jazz (Fit) hatchback.

"Today, rising oil prices is a big issue and mileage [fuel efficiency] will be an important factor in the future. We are currently developing a smaller car than Jazz, which will be launched keeping in mind the global perspective," Fukui added.

Kevin Jacobs