Honda will produce diesel engines for its next-generation European Accord due as a 2003 model at its Honda Engineering Tochigi Technical Centre, which makes the low-volume engines used in the sporty S2000 roadster and Insight hybrid.

Honda already sells the Civic in Europe with diesel engines built by Isuzu in Poland. But the company has now decided to develop and produce its own engine without Isuzu's help because diesel demand in Europe is expected to steadily increase, Japanese reports said.

Honda plans to develop production expertise at its engineering subsidiary before moving engine assembly to the Sayama plant.