Honda is to join the race to manufacture more eco-friendly vehicles - which attract reduced car insurance premiums - with a new electric car planned for 2012 in the US and Japan.
Highlighting the increasing importance of green vehicles, president Takanobu Ito said: "Honda has no future unless we achieve significant reduction in CO2 emissions.
"The next 10 years will be a true test for Honda's survival."
The manufacturer, which currently makes the Insight and CR-Z hybrids, also plans to add a new plug-in hybrid to the line-up.
However, Mr Ito did not reveal details of the new car and the plug-in hybrid.
Honda's Japanese rival Nissan is already taking orders for its Leaf electric car, some of which will be built at its Sunderland plant.
Mitsubishi started sales of its mass-produced electric vehicle - the iMiEV - earlier this year, while Toyota is expected to bring out its electric car in 2012.
