MEXICO CITY, Aug 12 (Reuters) – Mexico’s car-making sector is making a comeback after years of losing production to Asia, as European and Japanese carmakers take on U.S. rivals by moving closer to their territory and rising labor costs make manufacturing in China less attractive.

The Mexican industry got a boost on Friday when Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) said it will spend about $800 million on a new plant to make sub-compact cars for the North American market. [ID:nN1E77B0MV]

Honda follows Mazda Motor Corp (7261.T: Quote, Profile, Research, Stock Buzz), which in June announced it will build a $500 million factory. Other companies including General Motors (GM.N: Quote, Profile, Research, Stock Buzz), Audi (VOWG_p.DE: Quote, Profile, Research, Stock Buzz) and Nissan (7201.T: Quote, Profile, Research, Stock Buzz) also have an eye on Mexico for new investments.

Mexico increased vehicle production to a record 2.3 million units in 2010, making it the world’s ninth-biggest carmaker, after production dipped in the first half of the last decade, according to data from international trade group OICA.

After a period when car companies were moving production to China, some are now coming back, said Vivian Olmos, vice president of business development at North American Production Sharing (NAPS), a company that supports manufacturers in Mexico.

Uncertainty over production costs in China, logistical problems and questions over intellectual protection are prompting car companies to reconsider manufacturing locations.

“For a variety of reasons there are companies that are now seeing that Mexico makes a lot of sense,” said Olmos, noting that labor and other costs in Mexico are more stable.