The 5-speed SMG was the first sequential transmission of the E46 model series. As gearbox basis the GS5S31BZ from ZF was used. The on the gearbox mounted, electro-hydraulic shifting system was developed by the italian automotive supplier Magneti Marelli. In contradiction to the SMG II from the E46 M3, all hydraulic components of the 5-speed SMG are mounted directly on the gearbox. The system offers an automatic (“D” on the instrument cluster) as well as an sport mode, which can be activated by a button next to the shift knob.

Magneti Marelli distributed its system also under the name Selespeed. It was not only used for the BMW E46 model series, but also for various Alfa Romeo, Fiat, Ferrari und Maserati vehicles.