Honda Motor Co is interested to develop electric car batteries in China to tap the country's technology and vast resources, its chief executive said, adding that a breakthrough was needed to bring the zero-emission cars into the mainstream.

If there is a suitable chance, we hope to work with China to (develop) batteries, Honda Chief Executive Takanobu Ito told reporters on Tuesday in southern China, where he announced a plan to boost annual production capacity by a third to 480,000 units at a Chinese joint venture, Guangqi Honda.

Honda has been among the least enthusiastic among Japan's automakers toward electric cars, and runs the risk of falling further behind domestic rivals Toyota Motor Corp and Nissan Motor Co, after the former tied up last week with Silicon Valley-based electric car maker Tesla Motors Inc.

There needs to be a major breakthrough in battery technology, Ito said, predicting it would take 10-20 years before battery-run electric cars became mainstream. Japan's No.2 automaker would instead focus on hybrids and other fuel-efficient vehicles for the near term, he said.

Honda is considering bringing electric cars in limited numbers to the United States, Europe and Japan, but unlike many rivals has no strategic partner with which it has committed to developing batteries for the vehicles.

Honda has a joint venture with Japan's GS Yuasa Corp to collaborate on lithium-ion batteries specifically for hybrid cars, and has said the two could work together on electric car batteries too, if the need arose.

GS Yuasa already develops and produces electric car batteries in a joint venture with Japan's Mitsubishi Motors Corp.

Having surpassed the United States as the world's biggest auto market last year, China has become an increasingly important battleground for global automakers, which are keenly awaiting Beijing's policy on the promotion of greener cars.

CHINA IN THEIR SIGHTS

With China's new-car market of more than 10 million vehicles a year, Beijing's stance toward electric cars could well determine the speed of roll-out for many automakers that are still on the fence.

Volkswagen AG, China's top foreign brand, said last month Chinese consumers' reaction to its electric cars would determine the fate of its plans to lead the industry in battery-powered vehicles by 2018.

Electric cars may well get the boost they need from China. The Shanghai Securities News reported on Monday the government was set to announce by the end of this month plans to subsidize buyers of pure electric vehicles by up to 60,000 yuan ($8,787) each and only 3,000 yuan for hybrid cars.

The move could be a boon for local automakers such as BYD Co, whose battery technology has attracted investment and interest from Warren Buffett and Daimler AG.

Honda sold about 580,000 vehicles in China last year -- about half what it sold in its most profitable U.S. market -- but Ito said China was growing in importance, and had the potential to become its No.1 market after 10 years.

He said he expected annual U.S. car sales to bounce back to 15-16 million in the next three to five years.

Analysts forecast U.S. car sales to reach 11-12.5 million this year, versus just 10.4 million in 2009 at the height of the global recession. (Editing by Doug Young and Valerie Lee)

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