Honda Motor Co.’s fully owned Indian two-wheeler making unit will spend Rs100 crore on upgrading its factory and introduce two new products next year, in addition to a previously announced Rs300 crore expansion plan, as it seeks to improve market share.

It has, however, put off plans to build a second plant, announced a few months ago, because it doesn’t anticipate to sell enough from the unit to warrant a new factory.

Honda Motorcycles and Scooters India (HMSI) will spend the money on expanding production in its factory at Manesar, Haryana to 12 lakh units in 2010 from nine lakh now and plans to introduce a new scooter and a 125-cc motorcycle model next year, said Shinji Aoyama, president and chief executive officer. HMSI, which has an 11% market share of two-wheelers, is also planning to develop a niche 100-cc motorcycle, which it plans to make in the Manesar factory.

Despite a slowdown in motorcycle sales this year due to higher lending rates, companies such as Hero Honda Motors Ltd, the nation’s largest two-wheeler maker, and its nearest rival, Bajaj Auto Ltd, are building new plants and developing products in anticipation of future demand. Motorcycles are the nation’s main mode of transport and two-wheeler sales are predicted to cross 10 million units a year in 2012, from 7.8 million now, according to the National Council for Applied and Economic Research.

The “new bike will be made in the current factory. We are going to build flexible (manufacturing) lines,’’ said Aoyama. This method would help the company produce different categories of bikes, using the same machines.

Honda expects the new bike to target a niche audience such as off-road bikes, but Aoyama wasn’t willing to clarify which exact segment the company was looking at. “We may not expect too much volumes from this bike,” he said.

Every eight of 10 motorcycles sold in the country are powered by 100-cc engines, a a segment dominated by Hero Honda and Bajaj, that sell the bikes for Rs32,000.