NEW DELHI - Honda Motor Co is not betting on an immediate recovery in traditional markets and will focus on bright spots China and India, although it will not build an ultra low-cost car to take on Tata Motor's Nano.

Chief executive Takanobu Ito said on Wednesday that Japan's second-largest automaker was researching a new compact car for Asian markets and more specifically for India, where it launched its first small car, the Jazz hatchback, earlier this year.

We are still undergoing tough times in many traditional markets, Ito told reporters in the Indian capital.

I wish I had the magic to predict these numbers, he said when asked about a recovery in these markets.

In terms of business planning, we are not predicting an immediate recovery to their original levels.

Honda's Japan operations are expected to stay in red though demand has been brisk, helped by generous tax reductions and incentives on hybrids such as its new Insight model.

U.S. sales spiked temporarily in August helped by the cash-for-clunkers programme, but the impact was short-lived and followed by a sharp slump in demand the following month.

Our top priority is on China and India, where we would like to grow the size of our business as much as possible, Ito said.

China has emerged as a rare bright spot for Honda. It sold 50,600 cars in the country in October, up 42 percent from a year earlier.

India is a smaller market. Honda sold 34,430 cars between April and October, an increase of 38 percent from a year earlier.

NO ULTRA SMALL CAR

Renault-Nissan and their Indian partner said on Tuesday they planned to launch an ultra low-cost car in India in 2012 that will cost less to make than Tata's Nano, the world's cheapest car at around $2,000 when it hit Indian roads earlier this year.

We don't have any plan for ultra low-cost car, Ito said, when asked if Honda looking at such a car in India.

In June, Honda launched the Jazz in India, the smallest car in its stable, and Ito said the second small car would be targeted at the expected and accepted price level of the Indian customer.

Honda, which makes and sells premium sedans Honda City, Civic and Accord in India, also owns 26 percent of India's top motorcycle maker Hero Honda. It also has a separate motorcycle unit, Honda Motorcycle and Scooter India Pvt Ltd. (Editing by John Mair)

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