Eicher Motors plans to invest Rs 500 crore to expand capacity as demand for commercial vehicles rises, and will also ramp up production of its bikes and engines, a top official said on Tuesday.

Part of the Rs 500-crore investment will go in doubling VE Commercial's truck capacity to 8,000 units per month in 3 years, Siddhartha Lal, chief executive officer of Eicher, told reporters on the sidelines of the World Economic Forum's India summit.

VE Commercial Vehicles is a joint venture between between Eicher Motors and Sweden's Volvo.

The company has a large cash balance as a result of strong cash flows and will make the investment using internal funds, he told reporters.

Sales of trucks and buses, a barometer of economic activity, rose 18.17 per cent to 50,835 units in October, industry data showed. Commercial vehicle sales in India rose 37.77 per cent in April-October on year.

"The entire expansion plan is now underway. It's all happening in the Pithampur plant," Lal said, referring to Eicher's existing plant in Madhya Pradesh.

Eicher, India's third largest truck and bus maker, plans to begin manufacturing medium-sized engines for commercial vehicles in early 2013, Lal said. It plans to invest Rs 300 crore to expand its overall engines capacity.

The firm which intends to raise capacity of its Royal Enfield bikes to 6,000 units per month by next year may also set up a new manufacturing plant to make more bikes, Lal said.

Eicher had not yet finalised a location for the new plant, he added. Royal Enfield is a unit of Eicher Motors. It currently makes 5,000 bikes per month.

"On Royal Enfield, the fact is that we have huge demand over supply right now. So really the issue is how we sort out the supply."

Eicher which wants to grow in the heavy duty CV segment plans to introduce a 25-tonne tipper in the next 4-5 months, he added.

At 1:40 pm, Eicher Motors shares were trading up 2.95 per cent at Rs 1,272 in a weak Mumbai market.