Related: Analyst resets Tesla stock price target ahead of Q3 deliveries The theory might sound a little funky for everyday people, but analysts see it playing out in the auto sector. A butterfly flapping its wings in China is blowing a mighty wind through carmakers on the other side of the globe.

Key Takeaways Morgan Stanley downgraded the U.S. auto sector and several companies in it because of growing competition from China.General Motors and Ford had their ratings and price targets cut.Morgan Stanley noted that China now produces 9 million more cars than it buys.

Should recent downgrades of Ford Motor ($F) stock and General Motors ($GM) stock scare investors away? Not necessarily, as in my opinion there is