With fewer people buying new vehicles worldwide, and those still purchasing in the U.S. now shunning smaller cars as a result of low gas prices, Honda Motor Co. Ltd.’s Takeo Fukui admits it might be difficult to meet sales targets for the new Insight hybrid-electric vehicle.

"We'll need to be more cautious about this target,” Fukui tells Reuters.

Honda has said it expects annual deliveries of the new Insight, launching in April in North America, Europe and Japan, to reach 200,000 units globally on a 12-month basis.

North America was to be the source of half of Honda’s Insight volume.

In November, U.S. demand for HEVs fell 50.3% from like-2007. Toyota Motor Corp.’s Prius, the best-selling HEV in the U.S., saw sales plunge 48.3%., while deliveries of Honda’s Civic Hybrid fell 67.8%, Ward’s data shows.

An executive with Toyota’s Lexus division recently told Ward’s low gas prices could make demand for Lexus’ upcoming dedicated HEV less robust than earlier believed.

Meanwhile, Fukui says Honda will not lower its fiscal-year financial expectations again, although he does express fear a strong yen will gravely harm Japanese auto makers.

"If we go beyond (¥100:$1), we would simply have to transfer more production overseas, cut more temporary workers and even start laying off permanent jobs," he says.

"Beyond that, we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario, move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry."

Currently the yen trades at ¥89.26:$1 and ¥124.39:€1.

Honda earlier this week slashed its profit expectations for its fiscal year ending March 31 and set a second-half yen-dollar exchange rate assumption of ¥95:$1, although Fukui tells Reuters Honda is calling for a rate of ¥90:$1 for its fourth quarter.

The Bank of Japan today cut its interest rate to 0.10% from 0.30% after the U.S. Federal Reserve took similar action on Thursday. The Fed’s move pushed the exchange rate to Y87.14:$1, marking the yen’s strongest position since September 1995.