Unveiling its mid-term Vision 2030 strategy plan, Honda said it would boost coordination between R&D, procurement and manufacturing to tame development costs as it acknowledged it must look beyond conventional vehicles to survive in an industry which is moving rapidly into electric and self-driving cars.

Honda has already spelled out plans to market a vehicle which can drive itself on highways by 2020, and the new target for city-capable self-driving cars puts its progress slightly behind rivals like BMW (BMWG.DE).

"We're going to place utmost priority on electrification and advanced safety technologies going forward," Honda CEO Takahiro Hachigo said.

Developing new driving technologies, robotics- and artificial intelligence-driven services and new energy solutions also would be key priorities for Honda in the years ahead, the company said.

LEVELING UP

Honda established a division late last year to develop electric vehicles (EVs) as part of its long-held goal for lower-emission gasoline hybrids, plug-in hybrids, EVs and hydrogen fuel cell vehicles (FCVs) to account for two-thirds of its line-up by 2030, from about 5 percent now.

By 2025, Honda plans to come up with cars with "level 4" standard automated driving functions, meaning they can drive themselves on highways and city roads under most situations.

Achieving such capabilities will require artificial intelligence to detect traffic movements, along with a battery of cameras and sensors to help avoid accidents.

BMW has said it would launch a fully autonomous car by 2021, while Ford Motor Co (F.N) has said it will introduce a vehicle with similar capabilities for ride-sharing purposes in the same year. Nissan Motor Co (7201.T) is planning to launch a car which can drive automatically on city streets by 2020.

Honda has been ramping up R&D spending, earmarking a record 750 billion yen ($6.84 billion) for the year to March.