Honda Motor reportedly is considering building a small car specifically for India, aiming to gain a bigger share of the globe's fifth-largest car market.

The car would be the first to be developed at Honda's local research centre and would be positioned above small, cheap entry-level models, such as Maruti Suzuki's Alto and Wagon R, Hironao Ito, senior vice president at Honda Genbetsu India, the R&D arm, told Reuters.

"Some specific model for India is necessary," Ito told the news agency, though refusing to give details of the type of car the company envisaged or its likely launch date.

India's car market is dominated by Maruti Suzuki and Hyundai Motor which have strong ranges of locally-developed cars built using parts from domestic suppliers, allowing them to price the vehicles competitively.

Honda, whose City model [also built and sold in ASEAN/Asia-Pacific markets] is India's top-selling sedan, had a 7.2% share of the Indian passenger vehicle market in April-November 2015, industry data showed. It also sells the Amaze compact car, CR-V sport utility vehicle and Jazz hatchback.

The study by Honda is likely to lead to the development of a small hatchback that will be produced in India and exported to other markets, consultant IHS Automotive associate director Puneet Gupta has said. IHS expects Honda to launch the vehicle around 2020 and sees production of 150,000 units a year, of which 50,000 will be for export.

Development of the platform and engine will be supported by the parent in Japan but the exterior and interior can be designed and developed locally, Ito told Reuters.

Honda's decision to begin the feasibility study was prompted by a shift in car buying preferences with consumers looking beyond basic, no-frills cars, said Ito. A higher level of localisation also supported the decision.

Honda already buys 80% of its parts from suppliers based in India.

"The market has also shifted to slightly bigger cars," Ito told Reuters. "Our strong point is that higher segment, and market growth is matching that."

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