TORONTO — Japanese auto giant Honda is considering plans for a third vehicle assembly plant in Ontario, according to a report in the Toronto Star.

Strong North American demand may lead the company to build a new southern Ontario facility in the next 10 years, as its two plants in Alliston, Ont. are expected to be at capacity for the foreseeable future, the newspaper reports.

The sources told The Star the company will likely make a decision within the next 12 to 18 months so it can start producing new models for the North American market in 2009. They added that if Honda would likely build the new plant away from Alliston because the existing complex is causing traffic gridlock and the company has tapped out the local pool of skilled tradespeople.

Honda’s output in North America has jumped 10 percent to more than 1 million vehicles in the first nine months of the year.

The company has three major auto assembly operations in the United States and a small plant in Mexico.

The news came just after a groundbreaking ceremony for rival Toyota’s second Canadian plant in Woodstock, Ont.

The new $800 million plant, which was first announced in June, will open in 2008. It will have an annual production capacity of 100,000 units of its RAV4 sport-utility vehicles and will employ 1,300 workers.

Toyota’s first Canadian plant in Cambridge has been in operation since November 1988.

— with files from the Toronto Star