The Mexican plant in Guanajuato State, will cost $800m to build, and will employ around 3,200 workers producing up to 200,000 cars a year.
Honda also says it is going to increase production at some of its existing plants in the US and Canada.
This is a welcome boost to the flagging auto industery in the United States as production at some of the factories was cut back in March due to parts shortages following the Japanese tsunami.
Honda said it will re-instate a second shift at its Alliston plant in Canada that was cut following the disaster.
It will also add shifts to its US plants in Indiana and Ohio.
The new Mexican factory will start producing by 2014 to meet what the company believes will be increased demand for smaller vehicles.
“With growing demand for fuel-efficient vehicles this plant will increase Honda’s ability to meet customer needs,” said Tetsuo Iwamura, chief operating officer for Honda’s North America region.
Newswarped thinks that Honda forgot to mention that they don’t tend to get tsunami’s in inland Mexico which was of course not a factor in their decision along with the other thing they forgot to mention about paying the Mexicans bugger all to build the cars.