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NEW DELHI – Honda Motor Co. President Takeo Fukui on Thursday unveiled a new version of the City, Honda's best-selling compact sedan in India, aiming to boost sales in this key emerging market as concern grows of a global slowdown in the auto industry.

Honda Motor Co. President and Chief Executive Officer Takeo Fukui, left, and company officials pose with the third generation Honda City during its launch in New Delhi.

With sales in the U.S., the world's largest auto market, falling to their lowest levels in years, auto makers have looked to red hot markets like India and China to help pick up the slack.

But now, these other auto markets are also showing signs of weakness. In India, auto sales fell in August, the second monthly decline in a row. Sales in China also fell, marking the first decline in auto sales in two years.

"Even in India, they are not immune to the cyclical nature of the economy," says Tatsuo Yoshida, an analyst for UBS Securities in Tokyo. "Investors have been very nervous about near term prospects of the Indian automobile market."

Looking to draw buyers back into the dealer showrooms during the upcoming festival months in India, Honda's new City model is part of a wave of new vehicle launches by car makers into the country's increasingly crowded auto market.

In 2007, the current City model was Honda's biggest seller, accounting for 37,000 of its total sales of 60,000 vehicles. In the first eight months of this year, sales of the current City are up 12% compared with the same period a year ago. The Japanese auto maker is expecting the new model to help lift Honda's India sales above last year's. Honda's goal for 2008 is to sell 80,000 vehicles in India, though it may not reach that target because of the slowdown in the Indian car market.

Honda's Mr. Fukui said the "sturdy" and "roomy" City is "Honda's most significant model" in the Indian market. Though it would be considered a compact, entry-level vehicle in developed markets, the City is viewed as a premium vehicle preferred by business executives here. The new model will cost about 800,000 rupees, making it Honda's least expensive vehicle in the Indian market but still beyond the reach of most car buyers.

Although Honda dominates the motorcycle market in India, the Japanese car maker doesn't yet offer any models in India's small car segment, which make up the vast majority of car sales.

The new City was also launched this month in Thailand, one of 39 countries where the model has been sold since the first-generation City was launched in 1996. Honda is planning to make the City one of its core models, similar to the Civic, Accord, CR-V and Fit.