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Morningstar | BMW Attractively Valued Despite Headwinds From Higher Spending on Electrification and Autonomy

Because of the strength of its intangible assets, including brand and intellectual property, BMW has a narrow economic moat rating. Brand strength has enabled premium pricing across all of BMW's products, while intellectual property supports the brand image with strong product execution, especially in powertrains.BMW continues to outperform the overall car market despite global economic uncertainties and is one of only a handful of automakers to which we assign an economic moat. As emerging-market consumers become wealthier, many will purchase luxury items for the first time. Given the aspirational nature inherent in the company's brands, including BMW cars and motorcycles, Mini, and Rolls-Royce, as well as the growth potential from increasing wealth in developing markets, we believe the company will continue to reward investors with solid returns.BMW has been able to consistently produce vehicles that command superior pricing as well as margins and to generate revenue increases above global vehicle growth rates. Under its long-term strategy to 2020, management set an interim 2016 goal of selling more than 2 million vehicles annually but had already surpassed the volume objective by 2014. BMW recently set the goal to achieve an automotive segment return on capital employed (roughly equivalent to Morningstar's calculation of return on invested capital) of 26%, which translates into an EBIT margin of 8%-10%. The company has achieved a 10-year historical median EBIT margin of 9.0%, already reaching its 2020 objectives. Since 2002, on average, the company has outearned its cost of capital annually by more than 700 basis points, a solid performance for an automaker.