A Honda spokesman said that, while no final decision had been made yet, building a new plant would be one option either in or after 2001.

"We face shortfalls in our current North American production and are exporting cars from Japan to the United States because of strong demand," the spokesman said.

"Building a new automobile plant in North America is one of our options for 2001 or thereafter, after we reach a capacity of 1.01 million cars in 2000. We are considering various ways to boost production in North America."

The company currently has a total annual capacity of 960,000 units per year at its two U.S. and one Canadian plant, which produce the Accord, Civic and Odyssey models.

The Japanese business daily Nihon Keizai Shimbun reported on Friday that Honda plans an initial investment of about 30 billion to 40 billion yen ($250million to $340 million) in a new North American plant with production capacity of 100,000 cars per year.

Analysts said the move was aimed at closing the gap between robust demand for Honda's cars and its relatively small production base in the United States and Canada.

"Supply is overwhelmingly low compared with demand for Honda cars in the United States," Nikko Salomon Smith Barney analyst Tsunemi Tachibana said.

Honda said it exports about 240,000 to 250,000 cars to the United States annually, including 60,000 of its popular Accords, in order to keep up with strong demand there.

Honda sold a total 1.13 million cars in North America in calendar year 1998, up 7.6 per cent from a year earlier.

Deutsche Securities Ltd analyst Toshiki Ouchi said a new Honda factory in North America would be positive for the company's prospects.

Analysts also said Honda's ability to expand production, at a time when several of its rivals were facing bleak prospects, showed the firm had no need to seek alliances withother manufacturers.

Ouchi said he expected Honda's group pretax profit to rise to 556 billion yen in the fiscal year that began on April 1 from an estimated 539 billion yen in 1998-99.