Continental AG has neglected its tyre business over the past five years but now plans to invest more than EUR500m in the sector, CEO Elmar Degenhart told Germany’s Frankfurter Allgemeine Sonntagszeitung newspaper.

He admitted that Continental, locked in a bitter power struggle with Schaeffler for much of the last two years, should have invested more in its tyre division over the past five years and is catching up now to boost organic growth in the segment.

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It plans to double tyre production capacity in Brazil and next year will increase production in China where its first passenger-car tyre was produced last week.

In India, Conti is discussing a cooperative venture while it is examining the possibility of launching its own production in Russia.

Degenhart stressed in the interview that tyre production is a long-term integral part of the group and that the diversification into tyres and electronics has helped Continental during the crisis, which Continental’s main shareholder Schaeffler is also appreciating.

Continental and Schaeffler will merge their operations at the end of 2011 at the earliest, he said.

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Degenhart said the most recent estimate of a 15% sales increase this year is a “conservative estimate,” but he declined to be more specific ahead of third-quarter earnings figures in early November. Sales growth is driven by emerging markets and China, where Continental will grow sales by some 50% and by up to 60%, respectively, this year, he said.

He also said he is confident that Continental will reach an operating margin “closer to 8.5% than to 8%.”