Honda Motor Co <7267.T> President Takeo Fukui said on Tuesday the U.S. market has shown signs of having bottomed out since the start of April.

A slump in demand in the key U.S. market has led carmakers to slash production levels in recent months and revise down their sales and earnings targets.

Honda's North America output plunged by more than half in February from the same month a year earlier, sliding for the fourth month in a row.

The chief executive of the No. 2 Japanese carmaker was speaking at a ceremony marking the start of construction of a joint venture plant for lithium-ion batteries for hybrid cars.

Honda, the No. 2 Japanese carmaker, and GS Yuasa Corp <6674.T>, Asia's biggest car battery maker, said they planned to make lithium-ion batteries for hybrid cars from 2010 at the plant in Kyoto in central Japan.

Blue Energy Co, in which battery maker GS Yuasa holds a 51 percent and Honda the remainder, will spend 25 billion yen ($255 million) to build the plant.

The plant will have the capacity to supply batteries for 200,000 to 300,000 hybrid cars a year, a Honda spokeswoman said.

Honda, which aims to secure a stable supply of batteries for increasingly popular hybrids, and GS Yuasa, which aims to expand its sales, agreed in December on forming the joint venture.

Japan's Toyota Motor Corp <7203.T> and Nissan Motor Co <7201.T> have battery ventures with Panasonic Corp <6752.T> and NEC Corp <6701.T>, respectively.

GS Yuasa has a separate lithium-ion battery venture with Mitsubishi Motors Corp <7211.T> and Mitsubishi Corp <8058.T>, which mainly supplies electric vehicles to Mitsubishi Motors.

GS Yuasa President Makoto Yoda said at the same event that the company plans to focus on supplying Honda and Mitsubishi, instead of searching for more partner carmakers.

Honda launched the fully remodeled Insight hybrid car in Japan in February, with the lowest price tag for a hybrid vehicle, which may heat up competition with Toyota Motor Corp's <7203.T> pioneer hybrid Prius.

Honda shares closed down 4.9 percent at 2,730 yen, while GS Yuasa edged up 5.2 percent to 674 yen. The Nikkei stock average <.N225> fell 2.1 percent.

(Reporting by Nobuhiro Kubo in Kyoto and Yumiko Nishitani in Tokyo; Editing by Hugh Lawson)

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