Key Takeaways:
- BMW is navigating China market challenges while launching its transformative Neue Klasse electric vehicle platform.
- BMW stock could reasonably reach €98/share by December 2027, based on our valuation assumptions.
- This implies a total return of 22% from today’s price of €80/share, with an annualized return of 9% over the next 2.2 years.
BMW Group (BMW) is confronting one of the most significant inflection points in its storied history.
The German luxury automaker faces intense competitive pressure in China, its largest market, while simultaneously preparing to launch the Neue Klasse platform that will define its electric vehicle strategy for the next decade.
Add in tariff uncertainties between the U.S. and Europe, and the investment case becomes complex. Yet BMW delivered 0.4% global volume growth in Q2 despite a 13.7% year-over-year decline in China.
Europe and the Americas compensated for weakness in China, demonstrating the strength of BMW’s global footprint. The company maintained its full-year guidance of 5% to 7% operating margins and slight volume growth despite these headwinds.
Under CEO Oliver Zipse’s leadership, BMW is making strategic choices about where to compete and where not to compete. The company refuses to chase volume in China’s sub-CNY 150,000 price segment, which represents the fastest-growing part of that market.
Instead, BMW is betting on brand strength, product excellence, and the upcoming Neue Klasse platform to stabilize its position.
BMW operates through a manufacturing-intensive business model with production facilities globally, including significant capacity in China, Europe, and the United States.
The company sells premium vehicles under the BMW, MINI, and Rolls-Royce brands, with increasing focus on electrification and digitalization.
BMW stock has historically traded at modest valuations compared to luxury peers, reflecting the cyclical nature of the automotive industry and China exposure.
Here’s why BMW stock could provide attractive returns through 2027 as the company executes its electric vehicle transformation while managing near-term market challenges.
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What the Model Says for BMW Stock
We analyzed the upside potential for BMW stock using valuation assumptions based on the company’s Neue Klasse product cycle, China market stabilization prospects, and margin recovery as investment intensity moderates.
The opportunity ahead for BMW centers on the iX3 launch in November 2025, which represents the first production vehicle on the Neue Klasse platform.
Management describes journalist reactions to pre-production testing as overwhelmingly positive, with one quote standing out: “I’ve never driven a better BEV in my life.”
The Neue Klasse platform integrates four key technology clusters: electric drivetrain, autonomous driving capabilities, digital integration, and software architecture.
This represents more than a decade of engineering development aimed at creating what CEO Zipse calls “a masterpiece of engineering.”
Beyond product launches, BMW faces the challenge of stabilizing its China business. The company is restructuring its dealer network, aiming to reduce dealer points by roughly 10% and owners by 20% by year-end 2025 compared to the end of 2024.
Based on estimates of 1% annual revenue growth, 8% operating margins, and a normalized P/E valuation multiple of 7x, the model projects BMW stock could rise from €80/share to €98/share.
That would be a 22% total return, or a 9% annualized return over the next 2.2 years.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for BMW stock:
1. Revenue Growth: 1%
BMW experienced a revenue decline of 8.4% in the most recent fiscal year, primarily driven by volume and pricing pressure in China.
The European segment showed robust momentum in Q2, with BMW gaining market share. CEO Zipse highlighted that Europe’s car fleet is aging, creating replacement demand.
The company’s broad product portfolio, from the 1 Series to the 7 Series, available in both combustion and electric variants, positions it well to capture this demand.
Notably, Rolls-Royce generates over €500,000 in revenue per car with bespoke content exceeding 50%. This high-margin business provides stability independent of broader market sentiment.
However, China market dynamics remain challenging, with Chinese manufacturers expected to grow market share from the current 59% to potentially 65-70% over the next few years.
CFO Walter Mertl acknowledged that while BMW targets flat to down 5% volumes in China for the year, the company is “approaching that from the level below.”
Pricing pressure persists in China due to regulatory changes around bank commissions to dealers and intense competitive dynamics. Transaction pricing has seen “slight sequential recovery” in recent weeks but doesn’t entirely compensate for lost dealer income streams.
We forecast 1% annual revenue growth, reflecting the offsetting dynamics of Neue Klasse momentum in Europe and the U.S. against continued China market challenges and the dealer network restructuring that will temporarily weigh on volumes.
2. Operating Margins: 8%
BMW achieved operating margins of 8.1% over the past twelve months, below historical averages but reflecting current market conditions. The company maintained its full-year guidance of 5% to 7% operating margin range despite Q2 pressures.
The investment peak is behind BMW, with management consistently highlighting that capital expenditure is declining year-over-year.
CFO Mertl noted: “We presented that our fixed cost, our operational fixed costs are declining every quarter. We presented and proved that one in Q1, and we have done so in Q2.”
BMW expects to continue reducing operational fixed costs in Q3 and Q4 of 2025. CapEx peaked in Q4 last year and will be substantially lower in Q4 of 2025, providing cash flow benefits.
R&D expenses are also declining on a year-over-year basis as development work on Neue Klasse transitions from engineering to production.
BMW faced approximately 200 basis points of margin pressure from tariffs in Q2, resulting in roughly 125 basis points for the full year.
Management indicated the second half impact would be approximately 100 basis points, reflecting the stabilization of the EU-U.S. trade framework at 15% reciprocal tariffs.
BMW’s global manufacturing footprint partially mitigates tariff exposure. The company imports and exports between the U.S. and Europe, creating natural offsets. Zipse emphasized: “It’s not a complete disaster for our business model because BMW has a global business model.”
We estimate 8% operating margins based on BMW’s cost reduction momentum, moderating tariff impacts, and the benefits of moving past peak investment while acknowledging near-term ramp costs and China pricing pressure.
3. Exit P/E Multiple: 7x
BMW stock currently trades at a 7.2x forward earnings multiple, while historical P/E multiples average 6.7x over the past year, 6.2x over three years, and 6.5x over five years, showing the stock persistently trades at depressed valuations.
We apply a 7x exit multiple, roughly in line with current valuation but slightly above historical averages. BMW represents a high-quality premium automotive franchise with strong brand equity, global manufacturing scale, and engineering excellence.
BMW’s competitive position relies on brand strength and product quality in an environment where profitability levels are “very low, also for the Chinese players.”
Management believes that brands with heritage, a track record of reliability, and high-quality products will have advantages as the market consolidates. But the path and timing remain uncertain.
The electrification transition also carries execution risk. While journalist feedback on Neue Klasse has been exceptional, commercial success requires winning customer preference in competitive markets.
BMW’s approach focuses on profitable individual mobility rather than testing unproven business models. Zipse stated: “When we launch a car, it must be profitable from the first car on.”
The 7x multiple reflects BMW’s quality franchise and strong management while accounting for China market risks, electrification execution requirements, and persistent automotive sector cyclicality that keeps valuation multiples depressed.
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What Happens If Things Go Better or Worse?
Different scenarios for BMW stock through 2030 show varied outcomes based on value strategy execution and consumer recovery: (these are estimates, not guaranteed returns):
- Low Case: Continued China deterioration and Neue Klasse delays → 2% annual returns
- Mid Case: China stabilization and successful Neue Klasse launch → 7% annual returns
- High Case: China recovery and Neue Klasse momentum exceeding expectations → 10% annual returns
Even in the conservative scenario, BMW stock offers modest positive returns supported by cost discipline and European market strength.
The company’s refusal to chase unprofitable volume in China, while potentially painful in the near term, protects long-term brand equity and profitability.
The upside case could deliver solid performance if Neue Klasse achieves the benchmark status management expects while China market conditions improve from current levels.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
