Honda is considering building another factory in Mexico as it looks for further expansion in the North American car market.
Japan's Nikkei business daily said the carmaker plans to invest about JPY20bn (US$260m) in a new facility close to its existing plant in central Mexico to manufacture models such as the Fit [Jazz] subcompact, currently exported from Japan.
A company spokesman confirmed Honda was looking for a place to build a new plant in Mexico but added that no decision has yet been taken.
Honda's existing plant in Mexico is already running at near capacity while the Japanese yen has risen near record high of JPY76.25 to the dollar this month, making domestic production more costly.
Nikkei said Honda aimed to start operations at the new plant in 2014 with initial production capacity of 100,000 units.