The facility, which will be the company's fourth manufacturing plant in the country, is scheduled to start production by 2015-end.
The plant, with an annual production capacity of 1.2 million units, is slated to come up at Vithalapur in Ahmedabad district of Gujarat.
"The latent demand of automatic scooter is so strong that with improving infrastructure in rural India, we foresee that this segment sale can go up to 35 per cent of overall two-wheeler sales in 5-10 years horizon," HMSI President and CEO Keita Muramatsu said in a statement.
Honda Motor Company Chief Operating Officer Asia & Oceania Region, Noriaki Abe, said India is already a priority market for Honda.
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"In the current fiscal 2014-15, Honda aims to sell 18.2 million two-wheelers worldwide and for the first time, India will contribute almost 25 per cent to global Honda sales," he added.
Honda Motor Company Managing Officer Yoshiyuki Matsumoto said with the fourth plant, the company aims to reach closer to the vast market in West which contributes over 25 per cent to Honda's business.
The 1.2 million additional capacity would enhance the company's total annual production capacity in the country to 5.8 million units.
HMSI currently produces 1.6 million units at its Haryana plant, 1.2 million units at Rajasthan facility and another 1.8 million units at its third plant in Karnataka.
The foundation stone laying ceremony was attended by Gujarat Chief Minister Anandiben Patel and Finance Minister Saurabh Patel, among other senior dignitaries from the Gujarat government.