MUMBAI - Japan's Honda Motor Co's Indian car unit has revived plans for production at its second plant in India due to a surge in sales last year, a senior company official said.

Honda had deferred plans in 2008 for its new plant in the northwestern Indian state of Rajasthan, citing depressed auto demand.

The company may decide to start production at the second plant once it reaches full capacity utilization of 100,000 units at its first plant near the capital Delhi, Jnaneswar Sen, Honda Siel Cars India's marketing head, told Reuters in an email interview. Sen did not say when the first plant would reach full capacity.

The second plant, would have an initial annual capacity of 60,000 units with an investment of 10 billion rupees.

In the first ten months of 2009/10 (April-March), Honda Siel sold 49,609 units, a rise of about a fourth from a year ago.

With the entire Honda range refreshed this year, we have a positive outlook and we are confident that we will end this financial year with double-digit growth, Sen said.

Honda in India, with a market share of about 4 percent, sells the premium compact hatchback Jazz, the best-selling Honda City, the Civic, Accord and the sport utility vehicle Honda CR-V.

India's car sales have surged more than 24 percent in the first 10 months of 2009/10, after slumping 1 percent in 2008/09, data from Society of Indian Automobile Manufacturers showed.

The auto sector benefited from a slew of government incentives to stimulate the economy, including cuts in factory-gate duties, bringing back customers to car showrooms.

But any rise in excise duties, and increases in raw material prices and rise of the yen against the rupee, could put an upward pressure on costs.

The biggest challenge for car makers in the coming year will be to introduce products that meet the changing demands of the consumers, Sen said.

Honda, which is set to battle larger rival Toyota Motor Corp in the Indian compact car segment, has been beset by recall problems globally due to faulty window switches and airbags.

In India it recalled about 8,500 2007-model Honda City's with defective power windows.

Sen declined to give an idea of the costs involved in replacing the defective part. We are still working on this and it is very difficult for us to give any details... he said.

(Editing by Surojit Gupta and Muralikumar Anantharaman)