I'll be the first to admit that I'm not overly bullish about the investment opportunities in the auto industry. After all, the automotive business is labor-intensive, requires high levels of capital expenditure, and is frequently affected by issues beyond its control such as high energy prices and fluctuations in the cost of steel. Furthermore, many auto companies face substantial pension and health-care costs that are prohibitively expensive in this era of cutthroat competition. One needs to look no further than the current trials and tribulations besetting former American icons such as Ford (NYSE:F) and General Motors (NYSE:GM) or Italy's Fiat (NYSE:FIA) to be cautious of investing in this fickle industry.

That said, I do think there are a few decent bets among global car manufacturers, especially among those with significant exposure to fast-growing emerging markets. No, I'm not talking about profit machine Toyota (NYSE:TM) -- though it's hard to fault the company's impressive track record. Instead, India's Tata Motors (NYSE:TTM) is one of my favorite plays in this category.

In Foolish terms, I believe that as India's economy continues to power ahead -- a recent report by Standard & Poor's expects India's GDP growth to clock in at 8.5% in 2006 and expand by a further 7.5%-8% in 2007 -- millions more Indians will enter the ranks of the nation's middle class. I also believe these newly enriched consumers will be willing to plunk down their rupees on a new car. Since Tata Motors holds a leadership position in the India's underdeveloped automotive market, I believe that the company is looking at a pretty profitable future over the next few years, and that long-term, risk-tolerant investors might want to take a look. The stock's current attractive value, given its growth prospects, and its roughly 1.4% yield, are just icing on the cake.

Let's take a quick look, shall we?

Tata Motors -- part of the Tata Group conglomerate -- is the largest overall automotive manufacturer in India, with total sales of $5.4 billion for the fiscal year ended March 31, 2006. Tata holds a dominant position in the domestic commercial market (i.e., trucks, buses, etc.), where it commands a whopping 62% share of the market. It's the No. 2 player in the passenger car market, with roughly a 17% share of this fragmented sector.

To say there's ample room for growth is an understatement. According to the International Organization of Motor Vehicle Manufacturers (OICA), the car penetration rate in India is roughly seven cars per 1,000 people. To put that number in perspective, the global average is around 120 cars per 1,000 people, and even China boasts a penetration rate of approximately 20 cars per 1,000 citizens.

All I can say is "Wow." Little wonder industry experts are predicting that car sales in India will rise at a compound annual growth rate of 9.5% through 2010. Even that estimate could prove conservative, given the rapid growth of India's middle class, a middle class that is expected to grow from roughly 27% of the population currently to 50% of the population in 2025.

You get my drift.

As I said previously, Tata Motors is well-positioned to benefit from these trends, and the fact that it's posting sales (and profits) quite a bit ahead of the industry average is encouraging. For the second fiscal quarter ended Sept. 30, Tata reported that sales climbed 37% to roughly $1.7 billion, while profits increased some 31% to $117 million. While I'm never a big fan of seeing sales growth outpace profit expansion -- a sure sign of margin pressure -- I'm willing to give the company the benefit of the doubt, since the main culprits behind this decrease in margins are higher energy costs and increased steel prices. These factors are an industrywide issue, not company-specific.

At a recent price near $21 per share, Tata Motors trades at 18 times trailing-12-month earnings. That multiple that might seem steep for an automobile manufacturer, but it's historically low for this company. This is certainly not a stock in which I'd recommend investing your grandmother's nest egg, but for investors with a long-term horizon and an ability to stomach volatility, it might be worth taking a look.

Further Foolishness:

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Fool contributor Will Frankenhoff is enjoying his time writing for the Fool more than reading The Financial Times, rooting for the Jints, or taking a nap. He welcomes your feedback. He does not own shares in any of the companies mentioned above.