A valuation thesis on BMW Group examining the tariff-driven margin compression in FY2025, the Neue Klasse electrification cycle, and a peer-anchored DCF built for a capital-intensive, cyclical OEM. Prepared as a research pitch for the 360 Huntington Fund.
BMW's Automotive segment EBIT margin fell to 5.3% in FY2025, absorbing roughly 1.5 points of drag from US and EU tariffs. FY2026 guidance of 4–6% still brackets that as the low point rather than a new normal, while the Neue Klasse platform — led by the iX3 and the newly unveiled i3 — gives the group a multi-year product cycle to re-accelerate growth.
The DCF discounts FY2026E–FY2030E Automotive segment free cash flow at a 7.62% WACC (cost of equity 8.49%, built from a 3.1% risk-free rate, 0.77 beta, and a 7.0% equity risk premium that includes a tariff/EV-transition company premium). Terminal value is anchored to a 3.2x exit EV/EBITDA multiple — cross-checked against Volkswagen (3.8x) and Mercedes-Benz (7.4x) — rather than a Gordon Growth perpetuity, which materially overstated fair value in an early iteration of this model. Full assumptions, formulas, and a WACC/exit-multiple sensitivity grid are in the downloadable Excel model.