The European auto industry can expect to take a €72 billion hit over the next two years, according to Morgan Stanley. Underperformers will include Porsche and Fiat, but Renault may do better than its competitors.

Morgan Stanley released new investment ratings for the European automotive sector earlier Thursday. The new ratings include lowered estimates of value for each company in the industry. This devaluing is based on the investment firm's model of a two-year-long declining economy.

Amongst the new ratings is the downgrading of Porsche to "underweight" from "overweight," meaning the firm believes Porsche will either not meet expectations, perform worse than other comparable companies, or both. Fiat was also downgraded to "underweight.

The whole industry is not made up of potential dogs, however. Renault was upgraded to "overweight" from "underweight," while auto safety system manufacturer Autoliv was upgraded to "overweight" from "equal-weight."

Morgan Stanley believes the European auto industry will lose €72 billion over the next 24 months, going from €30 billion cash-in-hand, to a net debt of €42 billion within two years. The investment company expects the sector to return to normal profit margins in 2012.

Gallery: Morgan Stanley downgrades Porsche and Fiat, upgrades Renault