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By Kae Inoue and Makiko Kitamura

June 23 (Bloomberg) -- Honda Motor Co., Japan’s second- largest carmaker, will cut the number of models sold only domestically to trim development costs.

The company plans to eliminate some of the 10 models exclusive to Japan over the next five or six years, Hiroshi Kobayashi, Honda’s Japan sales head, said in an interview in Tokyo yesterday, without specifying the models.

Tokyo-based Honda sells 28 models in Japan, compared with 18 in the U.S. and nine in China, the two biggest car markets. Industrywide sales in Japan peaked in fiscal year 1990 at 7.8 million units and dropped to 4.7 million vehicles last fiscal year.

“Given that Japan is not a growing market, it’s not attractive for introducing new models,” said Masatoshi Nishimoto, an analyst in Tokyo at auto consulting company CSM Worldwide.

Development costs per model run from under 10 billion yen ($104 million) to adapt an existing platform to over 50 billion yen for a luxury model, according to Koji Endo, an auto analyst in Tokyo at Credit Suisse Group AG. Honda plans to spend 515 billion yen on research and development in the year ending March, an 8.5 percent drop from last fiscal year.

Honda may cut the number of large models it offers in Japan while adding compact models for which there is strong demand, Kobayashi said. The Fit compact, new Insight gasoline-electric hybrid and Freed minivan are currently Honda’s domestic top- sellers.

The carmaker has so far received 40,000 orders for the Insight, which went on sale in February, and is likely to meet its target of 60,000 units for the year, Kobayashi said.

The company already plans to stop selling the Edix minivan in August, said Kenji Matsumoto, a Honda salesman at a dealership in Tokyo. He also named the Crossroad sport-utility vehicle as a model that is difficult to sell.

To contact the reporters on this story: Kae Inoue in Tokyo at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; Makiko Kitamura in Tokyo at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

Last Updated: June 22, 2009 19:08 EDT

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