Honda Motor expects Chinese sales up 10% to 730,000 vehicles in 2011 and needs volume of 2,000 units a month for hybrid production there to be viable.

"We expect the overall (Chinese) market to grow by an average 10%," Seiji Kuraishi, head of Honda's China operations, told Reuters in Tokyo. "We will aim for a growth of more than 10%, of around 730,000 units."

Kuraishi said that while Beijing was moving towards fiscal tightening and discontinuing tax incentives on smaller cars next year, growth will be rapid in inland regions, which are replacing coastal cities as the major driver of car sales.

To achieve fast growth in those markets, Kuraishi said one key would be the debut next year of the proprietary brand of Honda's joint venture with Guangzhou, called Guangqi Honda. The first car under the brand, called Everus, or Linian in Chinese, will debut at the Guangzhou motor show next week.

"I have very big expectations for the brand," he said, declining to disclose a sales target or specific product plans.

Honda will aim to build hybrids locally as soon as possible, with or without sales subsidies from the government, Kuraishi said.

He said Honda had no specific timetable, but added that it would need minimum monthly production of about 2,000 vehicles to make local hybrid production viable. Last year, Honda sold only about 300 imported Civic hybrids in China.

"For (local production), lowering the cost and product price will be important, which means we would have to localise the core components such as the batteries and motor," he said.

Kuraishi added that Honda would want a wholly owned subsidiary to produce the electric motors, developed in-house, in China without a local partner to prevent an outflow of the advanced technology.

But Honda would be open to procuring batteries from any maker, including Chinese ones, as long as they met the car maker's quality standards, he said.