HONDA, Japan's second-largest auto maker, will delay opening its second car factory in India, as the pace of growth in the market slows.

Honda aims to open the plant in the northern Indian state of Rajasthan by October 2010 at the latest, from its original schedule of 2009, Tokyo-based spokesman Sakae Uruma told Bloomberg News yesterday.

The delay was first reported by the Wall Street Journal.

However, the engine parts and press units at the facility did began operations yesterday, the company said in a statement.

Higher auto loan rates and the fastest inflation in 16 years caused industrywide vehicle sales in India to fall in July and August, the first time in two and a half years. General Motors, Toyota and Ford are among carmakers spending US$6 billion to build factories in India.

"Demand is going down in the near term," said Vaishali Jajoo, a Mumbai-based analyst at Angel Broking Ltd.

"Still, companies are looking at the long-term prospects in India and are setting up plants now to meet the demand in future."

Honda's car sales in India fell 14 percent to 19,058 between April and August, according to the Society of Indian Automobile Manufacturers. The country's overall sales in the five months gained 6 percent to 491,538.

SIAM, a grouping of all vehicle makers in the country, last month cut its growth forecast for the financial year to 10 percent, from as much as 13 percent, saying inflation and higher rates are damping demand. Car sales may triple to 3 million by 2015, according to government estimates.

"For Honda, India is a very important market and our faith in India's growth story stays intact," the auto maker's president Takeo Fukui said yesterday at the site of the new factory. "Our investment plans in India are on track."