Japan's third largest car maker Honda reportedly says a renewed drive to bring its R&D and production operations closer together are crucial to thriving in an industry where the race to develop unique and fuel-efficient cars has intensified.

"We're at a critical juncture where we have to really fortify the link between R&D and production," Motoatsu Shiraishi, a senior executive who took over Honda's R&D unit last Friday, told Reuters.

"For example, when hybrid and fuel-cell cars become more common, it won't be enough to come up with a better product at the research level. We have to make it commercially viable when it's mass-produced," he reportedly said in a recent interview.

Reuters noted that Honda launched its first hybrid in the US in 1999 and also has a marketable fuel-cell vehicle that can be driven in freezing temperatures.

But Honda expects to face heightened competition as rivals gear up to bring their next-generation cars to market, the news agency noted, and has, typically, chosen to go it alone while most of its peers have formed capital and technical ties to speed up development.

That independence means Honda can't reap the kind of cost savings that Nissan Motor enjoys by buying common parts with partner Renault to take on General Motors, Toyota and others, Reuters noted.

"We are small and weak when it comes to scale. A company like ours has to compete by staying one step ahead of the rest in the field of technology," Shiraishi reportedly said, stressing that a closer link between R&D and production was a must.

Reuters said Honda had made that point by appointing as president of Honda R&D a man who spent all of his 36 preceding years with Honda in production engineering - he replaces Takanobu Ito, who switches to head production at the Suzuka factory, Honda's biggest in Japan.

The news agency said that, for Honda, the R&D field has never been too broad - it famously dabbles in jet engines and humanoid robots, while also conducting research into bio-fuels and solar power, among others.

While Honda has done well business-wise - it has never posted a loss and is valued at $US48 billion, second only to Toyota in the global auto industry - some critics have wondered whether the quirky carmaker is spreading its resources too thinly, Reuters noted, adding that insiders point out that Honda's R&D spending is comparable to rivals', at around 5% of revenues, and, more importantly, the outlays yield dividends for its core motorcycle and car making businesses.

As cars become more computerised, the technological know-how gained from developing robots - such as voice and visual recognition skills - comes in handy and the aircraft business gives Honda valuable insight into reducing the weight of cars, the report added.