Honda Motor Co. may have cracked the formula for success in India: a diesel-powered compact sedan.

The Amaze, introduced in April, drove the automaker’s sales to a record the following month and propelled Honda to third place among carmakers in Asia’s third-biggest market from as low as No. 8 in 2011. After denting Maruti Suzuki India Ltd.’s sales of the bestselling Swift DZire subcompact in May and June, Honda is doubling capacity and planning more models, said Jnaneswar Sen, senior vice president for sales and marketing at Honda Cars India Ltd.

“We’ve never faced this happy situation,” Sen said in an interview at the company’s factory in Noida, near New Delhi. “We will grow fast and we are working towards becoming the most trusted brand in India.”

Honda, which was the only automaker in India that didn’t offer a diesel-engine car until March, is catching up with its rivals to benefit from the popularity of a fuel that is 26 percent cheaper than gasoline.

The Amaze will hurt Maruti, which is seeking to shield its market and margins amid the worst slump in more than a decade, according to Mayur Milak, an analyst with Dolat Capital Market Pvt.

“The launch of the Amaze has given people an opportunity to look beyond the DZire,” said Mumbai-based Milak. “Having a Honda badge helps and going forward, growing competition will hamper Maruti.”

The share of diesel cars sold in India swelled to 47 percent in the year to March 31 from 40 percent in the previous 12 months as the government subsidizes fuel to benefit farmers and freight operators. Gasoline at a New Delhi pump costs 68.58 rupees ($1.15) a liter, while diesel sells for 50.84 rupees.

The Amaze subcompact, which is the Brio hatchback with a trunk, has a waiting period of four to five months, Sen said. The diesel variant starts from 602,900 rupees in the capital, while the DZire equivalent sells for 599,500 rupees.

Sales at Honda’s Indian unit, including those of the City, Accord and CR-V, reached 11,342 units in May and jumped 248 percent to 9,297 cars in June, versus as few as 1,072 in December 2011, according to data provided by the Society of Indian Automobile Manufacturers.

Suzuki Motor Corp.’s local unit sold 12,548 DZire cars in June, down almost 9 percent from a year earlier. The dispatches declined 2.5 percent in the previous month. Mayank Pareek, Maruti’s head of sales, didn’t answer two calls made to his mobile phone.

“Honda does have a significant amount of pull as far as the Indian buyer is concerned,” said Mohit Arora, executive director at J.D. Power Asia Pacific in Singapore. “Clearly, with a slowdown in the market, the largest player is bound to be hit. There would be impact on Maruti if it doesn’t come up with a new model.”

The slowdown for Maruti’s DZire comes at a time when industrywide car sales are on course for the eighth consecutive monthly decline in June as decelerating economic growth and high interest rates keep buyers from showrooms. Annual sales in the year through March 31 fell 6.7 percent to 1.89 million units, the biggest decline since 2001, according to SIAM.

India’s $1.8 trillion economy expanded at the weakest pace in a decade in the period, hurt by an uneven global recovery and moderating investment.

To boost demand in the current economic environment, carmakers from General Motors Co. to Volkswagen AG and Ford Motor Co. are introducing new models and offering discounts to induce buyers. Rising competition from global carmakers has eroded Maruti’s market share from about 60 percent a decade ago to 39 percent last year. Now, Honda may challenge it further.

The automaker will add a seven-seat minivan based on the same platform as the Amaze next year that will compete against Maruti’s Ertiga model, followed by a compact sport utility vehicle, a new version of the Jazz hatchback and the City sedan, Sen said. The automaker will also open a 120,000 car-a-year factory in the western state of Rajasthan next year that will double its capacity in India, he said.

Suzuki Motor, which sells about 40 percent of its annual deliveries in India, will open a sixth plant this year at Manesar, near New Delhi, that will raise its capacity to 1.75 million units. The company is also building a new factory in the western state of Gujarat that will add a further 250,000 units of capacity.

Honda is aiming to break a sales record this year on strong demand in the United States, its biggest market, as well as a cheaper yen that makes exports competitive. In India, Sen says that Honda expects to sell more than 120,000 cars this year, half of which will be the Amaze.

Honda plans to add 10 dealers this year in India, and further increase localization on its models, Sen said.

“Honda has been resurgent throughout the world,” said J.D. Power’s Arora. “The challenge was the availability of diesel products, and that is clearly behind them.”

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