But sales growth has slowed this year due to weaker overall demand, and also because new taxation methods in Italy, Spain and France based on carbon dioxide output prompted buyers to flee to brands with low-emission cars such as Volkswagen AG.

"There's been a sudden shift to cars with low CO2 emissions," Shigeru Takagi, senior managing director and head of European operations, told a small group of reporters at Honda's headquarters in Tokyo on Friday.

"European makers are quickly responding to that trend, and right now we're a bit behind."

Takagi said overall demand in Europe was shrinking at a faster pace month after month, with September also starting off poorly. New car registrations in Britain, Honda's biggest market in Europe, had their worst August since 1966, while Germany, Italy and Spain also recorded double-digit drops.

About the only bright spot is Russia, where Honda's sales jumped 157 percent in the first six months of this year, single-handedly absorbing the drops in Western Europe. In all of Europe, Honda's sales grew 7.5 percent to 218,925 cars -- which represents just over a tenth of its worldwide sales.

At the current pace, Takagi said Honda's sales in Russia would exceed 100,000 cars in one or two years, from 38,600 in 2007. The biggest challenge now was supplying enough Civic and Accord sedans to meet swelling demand, despite plans to produce 60,000 cars at its Turkish factory this year -- or 20 percent beyond its official capacity, he said.

Takagi said Honda plans to roughly double the number of sales outlets in Russia to 100 in two to three years.

Honda was also studying whether to bring its premium Acura line -- now available only in North America and China -- to Russia, where distributors were clamouring for a launch, he said.

"There's quite a number of Acura MDX (sport utility vehicles) entering Russia through unofficial routes." A decision would need to be made "very soon", he said, because setting up a sales network takes two to three years in Russia.

"Even if we decide now, a launch would come no sooner than 2010."

Honda is aiming to boost sales in Europe, excluding Turkey, by 14 percent to 430,000 cars this year. The new Jazz hatchback, called Fit in some markets, will debut next month, with CO2 emissions likely to be somewhere between 120 and 129 grams/km.

EUROPE TO BE MAIN HYBRID MARKET

To grow everywhere else in Europe, Takagi said Honda was counting heavily on a new family of cheaper hybrid cars to go on sale in Europe, North America and Japan next spring.

The new dedicated hybrid model, Insight, will emit less than 120 grams per km of CO2, meeting requirements for tax incentives in many countries, and will come at a good time as diesel prices have risen to cost about the same as petrol, he said.

The concept version of the Insight will be shown for the first time at the Paris Motor Show next month.

Honda has also said it will roll out the CR-Z compact gasoline-electric sports car and a hybrid version of the popular Jazz to join the Civic hybrid over the next few years.

"With the Civic hybrid and the Insight next year, hybrid cars would make up about 10 percent or more of our total European sales," Takagi said. "That ratio would be higher than for any other region." Honda is aiming to double sales of the Civic hybrid in Europe this year to 20,000 units, while shooting for a bigger volume for the Insight, Takagi said. (Editing by Michael Watson)