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The Honda City Hybrid has been spotted near Jaya One, PJ – we thank reader Kenny Loh for the photo. Yup, the JDM Honda Grace‘s LED tail lamps are a giveaway, and the Melaka trade plate leaves little doubt as to the unit’s origin – Honda Malaysia’s Pegoh plant.

The Honda City Hybrid was confirmed for Malaysia early this year. It’s set to be locally-assembled (CKD) at the new No 2 Line in Pegoh, alongside the Jazz petrol, previous-gen Jazz Hybrid and City petrol, and very probably in the future, the second-gen Jazz Hybrid, HR-V petrol and HR-V Hybrid.

The car was supposed to launch this year, but issues with the Sport Hybrid Intelligent Dual Clutch Drive (i-DCD) one-motor hybrid system and the ECU – both shared with the second-gen Jazz Hybrid and HR-V Hybrid – had to be ironed out first. With its sighting in Malaysia, are we one step closer to its launch?

Perhaps more importantly, since tax exemptions for CKD hybrids will go on until 2015 ends, is it too much to hope for the Honda City Hybrid to undercut the top-spec RM90,800 City V petrol?