Engineering Cyber-Physical Systems (CPS) is complex and time-consuming due to the heterogeneity of the involved engineering domains and the high number of physical and logical interactions of its subsystems. Model-based Systems Engineering (MSBE) approaches tackle the complexity of developing CPS by formally and explicitly modeling subsystems and their interactions. Newer approaches also integrate domain-specific models and modeling languages to cover different aspects of CPS. However, MBSE approaches are currently not fully applicable for CPS development since they do not integrate formal models for physical and mechanical behavior to an extent that allows to seamlessly link mechanical models to the digital models and reuse them. In this paper, we discuss the challenges arising from the missing integration of physics into MBSE and introduce a model-based methodology capable of integrating physical functions and effects into an MBSE approach on a level where detailed physical effects are considered. Our approach offers a fully virtual, model-based development methodology covering the whole development process for the development of CPS. Evaluating this methodology on a real automotive use case demonstrates benefits regarding virtual development and functional testing of CPS. It shows potentials regarding automated development and continuous integration of the whole CPS including all domains. As an outlook of this paper, we discuss potential further research topics extending our development workflow.