Honda Motor Company said on Monday it plans to start mass-producing solar cells in 2007, eyeing growing demand for environmentally friendly energy sources, Reuters reported.

Japan's third-biggest automaker said in a statement it would build a new factory for solar cells on the site of a car plant in Kumamoto prefecture, on the southwestern Japanese island of Kyushu.

The company aims to generate annual sales of 5 billion to 8 billion yen ($40 million to $70 million) from solar cells once the factory's output reaches full annual capacity of 27.5 megawatts, enough to power about 8,000 households.

Honda will be competing with major solar cell manufacturers such as Kyocera Corp., Sharp Corp. and Mitsubishi Electric Corp.