TOKYO (MarketWatch) -- Honda Motor Co. (7267.TO) plans to start building a new factory in Mexico next year to sell cars in North America, the Nikkei reported Sunday.

The auto maker aims to produce vehicles such as the Fit compact in 2014 at the new plant, which the company is considering building near its existing factories in Jalisco, Mexico, the paper said.

Honda's move to produce more cars at local factories overseas is part of efforts to improve profitability amid the recent strength of the yen against dollar. The company now produces the Fit in Japan to sell in the U.S.

The company plans to spend about Y20 billion on the new investment, and production capacity is expected to be 100,000 vehicles per year, the Nikkei said.