Royal Enfield, the two-wheeler arm of Eicher Group, is looking to increase its production capacity beyond 150,000 units per annum by 2014 as it looks to strengthen position in the niche bike market.

The company, which is currently setting up a new plant near Chennai at an investment of Rs. 1.5 billion (US$ 27.8 million), expects to start production from the new facility within two months.

"With our new plant at Oragadam (near Chennai) coming onstream within the next few months, in 2013 we will have a total combined capacity of 150,000 units. We are already working to increase it beyond that by 2014," Eicher Motors Managing Director & CEO Siddhartha Lal said in a teleconference.

When asked what kind of additional capacity and investment the company is looking at, he said: "We have not decided on any particular number but all the fresh capacity will be by and large at the new plant."

The company currently produces bikes at Tiruvottiyur plant in Chennai.

With the new capacity coming in, Lal said the company hopes to reduce the waiting period for the Royal Enfield bikes, which ranges from 6-8 months.

Royal Enfield has been growing at over 50 per cent in the last two years and "we are investing substantially across all its functions to continue a strong growth momentum in the long term", Lal added.

The company is looking to enhance its position in the niche bike segment, he said.

Eicher Motors reported 4.5% decline in profit after tax for the calendar year 2012 at Rs. 4.74 billion, as against Rs. 4.97 billion in 2011.

The company's total income from operations was at Rs. 63.89 billion as against Rs. 56.84 billion in the previous year.