Eicher Motors Ltd expects a big boost in its motorcycle capacity once its proposed

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new plant near Chennai becomes operational in about 18 months, and is also investing on another plant to make engines, a senior official said.

The new motorcycle unit, which will have a capacity to manufacture 150,000 bikes is expected to be set up by the first quarter of 2013, Chief Executive Siddhartha Lal told analysts on a conference call on Monday. The firm plans to invest between 1.2-1.4 billion rupees on the new unit.

Eicher, which sells bikes under the Royal Enfield brand, expects to produce about 70,000 motorcycles this calendar year, from its existing plant, also in Tamil Nadu state. It had produced around 54,000 motorcycles last year.

The firm had recently secured 50 acres of land from the Tamil Nadu government to set up the new plant.

Eicher also expects its joint venture with Sweden's Volvo to spend about 3 billion rupees on a plant at Pithampur, which will make engines for Volvo trucks and buses, Lal said.

The JV known as VE Commercial Vehicles is expected to produce 85,000 medium duty engines annually in the first phase, he said. Production will start by December 2012 and will gradually be ramped up, he said.

Eicher, also India's third largest commercial vehicle maker, has raised prices across models by 1-2 percent, but does not have plans for a further increase in the near future, said Lalit Malik, chief financial officer.

Eicher Motors earlier in the day reported a 31 percent rise in June-quarter net profit.

In June, sales of trucks and buses, a key barometer of economic health, rose 17.8 percent to 62,009 vehicles, industry data showed.

Lal said he was "cautiously optimistic" about volume growth in the commercial vehicle industry and the industry has been able to pass on price increases to end customers.

"The sentiment is slightly weaker at this point, but the fundamentals seem to be reasonably good. I don't see as yet a downturn, if anything a little bit of flattening out is happening," Lal added.

Last week, India's central bank raised interest rates by a higher-than-expected 50 basis points, its 11th since March 2010. Industry officials had said such hikes could hurt liquidity and increase cost of funds. But the outlook for the longer term was very bullish, he said.

Eicher expects to double its capacity for trucks and buses to 100,000 units per year over the next five years, and will invest about 5 billion rupees in the next three years for the capacity expansion plans, Malik had told Reuters in February.

Eicher Motors shares closed up 2.79 percent at 1,357.15 rupees in a firm Mumbai market.