NEW DELHI (AFP) – Japan’s Honda Motors plans to set up a 200- million-dollar car plant in India to take advantage of the South Asian country’s rapidly-growing vehicle market.

The new plant will be Honda’s second in India and will be built in the western state of Rajasthan, the Press Trust of India reported.

It will have an initial production capacity of 50,000 units, a report said Saturday.

The company, which already has a manufacturing facility in Noida, a satellite city of the Indian capital New Delhi, has signed a letter of intent with the Rajasthan state government for the new plant, the news agency said.

The plant is expected to focus on the manufacture of small cars, seen as the fastest-growing segment of the Indian market.

Honda now sells its sedan models, such as the Accord, in India.

The world’s car makers have been investing heavily in India as they seek to make big inroads into one of the world’s fastest-growing vehicle markets and offset lacklustre sales at home.

Some 1.1 million passenger cars rolled off assembly lines in 2005 and that figure is forecast to reach two million by 2010, according to industry figures.

Automakers’ hopes have been fired by the growing disposable incomes of India’s middle class, estimated to number at least 300 million.

Honda hopes to sell 60,000 cars in India in the current fiscal year to March 2007, up from 43,000 cars a year earlier, the news agency said.