Construction on the plant may start next year near Honda's existing factory in Jalisco, Mexico, the business daily Nikkei said, adding that the new facility is due to begin operations in 2014.

Honda plans to spend about 20 billion yen ($260 million) on the investment, with the plant's initial production capacity expected to be 100,000 vehicles a year, the Nikkei said.

The plant will produce such vehicles as a next-generation model of the popular compact Fit, the report said.

Honda currently ships Fit compacts to the United States from a plant in Japan and sells about 60,000 units a year there, the Nikkei said.

Honda's existing plant in Mexico produces and exports sport-utility vehicles to such countries as the United States and Brazil, it added.

Customs duties are exempted between Mexico and the United States under a free trade agreement.

Copyright AFP (Agence France-Presse), 2011