Premium Product Pipeline Will Capture Global Luxury Demand

Key Takeaways

• Expansion of premium electric and luxury offerings positions BMW to capture rising global demand, driving higher margins and average selling prices.
  
• Strategic cost control, digital innovation, and network optimization support improved market share, profitability, and differentiation amid geographic and consumer shifts.
  
• Structural and regulatory pressures in key markets, lagging innovation, and volatile EV dynamics are threatening BMW's profit margins, market share, and long-term growth stability.

Catalysts

Develops, manufactures, and sells automobiles and motorcycles, spare parts, and accessories worldwide.

• The strong pipeline of new premium and ultra-premium products-including the high-margin electric iX3 (Neue Klasse) and expanded Rolls-Royce/ALPINA individualized offerings-positions BMW to capture growing demand from the rising global luxury consumer base, supporting both revenue growth and higher average selling prices.
  
• Robust replacement momentum in the aging European car fleet, combined with BMW's versatile product lineup (combustion and electric), improves market share in a stable, predictable region, mitigating weakness in China and potentially accelerating overall group volumes and sustaining profitability.
  
• BMW has strategically completed its investment peak in flexible manufacturing and capacity, leading to structurally lower capital expenditures and declining quarterly operating costs, which directly supports free cash flow and EBIT margin expansion.
  
• Ongoing dealer network rationalization in China is expected to reduce network fragmentation and improve transactional pricing, which, while temporarily impacting volumes, should strengthen BMW's brand position and underlying margins once completed.
  
• Market-leading advancements in driving experience, digitalization, and smart driver assistance features are generating strong early reviews and demand for BMW's BEV lineup, improving differentiation as consumers shift toward electrification and digital features, which should enhance revenue and net margins via higher-margin tech-enabled offerings.

Bayerische Motoren Werke Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bayerische Motoren Werke's revenue will grow by 3.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.2% today to 5.5% in 3 years time.
• Analysts expect earnings to reach €8.3 billion (and earnings per share of €13.88) by about August 2028, up from €5.7 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €9.8 billion in earnings, and the most bearish expecting €6.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.2x on those 2028 earnings, down from 9.1x today. This future PE is greater than the current PE for the GB Auto industry at 8.0x.
• Analysts expect the number of shares outstanding to decline by 1.89% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.81%, as per the Simply Wall St company report.

Bayerische Motoren Werke Future Earnings Per Share Growth

Risks

• Persistent margin headwinds from ongoing and potentially rising global tariffs-especially given the company's explicit acknowledgement of volatile tariff negotiations and the inability to fully include proposed credit schemes-could result in sustained higher costs and operational risks, adversely affecting EBIT and net margins in the medium to long term.
  
• Structural pressures in China remain concerning: BMW faces continued volume declines in its largest market, driven by competitive intensity, an unfavorable pricing environment, and a shrinking network of dealer points-notably as local brands' market share rises toward 65–70%. This could create prolonged revenue headwinds and erode profitability, especially if premium demand weakens or the dealer restructuring does not yield the intended stability.
  
• The management's comments on being "not in driverless cars" and emphasizing only profitable launches suggest BMW is at risk of falling behind in autonomous driving technology as industry peers like Tesla and Waymo race ahead. This technological lag might erode market share and pricing power in the premium segment, impacting future revenue growth and customer retention.
  
• Increased competitive pressure in the European BEV (battery electric vehicle) market-cited as potentially driving rivals to use aggressive price cuts or incentives to hit regulatory CO2 targets-poses risk of market distortions and declining profitability, especially if regulatory frameworks remain "tailpipe only" focused. Margin compression and return on capital could suffer if BMW is forced to match incentives or faces diminished brand pricing power.
  
• Ongoing challenges in the EV transition-namely, the need to advocate for new regulatory regimes and the inefficiency of current CO2 policies-combine with a dynamic, subsidy-driven market (especially in China and Europe) to expose BMW to unpredictable demand patterns, potential overcapacity, and regulatory compliance costs that threaten both revenue growth stability and long-term earnings resilience.

Valuation

• The analysts have a consensus price target of €87.967 for Bayerische Motoren Werke based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €108.0, and the most bearish reporting a price target of just €68.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €151.1 billion, earnings will come to €8.3 billion, and it would be trading on a PE ratio of 8.2x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of €84.74, the analyst price target of €87.97 is 3.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.