Yes, unfortunately the extended 10yr/120k mile warranty, while it covers a lot of components, does not cover the SCR.

The low DEF warning should come on approximately every 10000 miles. I gathered from your post that it was coming on every 500 miles at some point?

The SCR does not regenerate. What the service advisor is advising you is factually incorrect at best and part of a larger scheme to defraud you at the worst.

When I brought mine in due to an persistent low DEF warning and DeNOx System Inefficiency (P20EE/4D16). Dealer wanted to replace the SCR, pushed for it hard. Said "We'll do what you want but you'll be back in here with the same problems." I stood firm and only authorized them warranty items be replaced. That was 35k miles ago and all is well. I have gotten the P20EE code and CEL time to time but it's been about 5k miles without it. I use Liqui-Moly Super Diesel Additive every other tank, Diesel Purge every eighth tank followed by DPF Protector.

What are the fault codes that the dealer is getting with the CEL?

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8/2011 X5 xDrive35d Sport, Black Sapphire Metallic, Black Nevada Leather, Fine Burr Walnut Trim
2/2001 M5, Jet Black, Exclusive Complete Black Walk Nappa Point Heritage Leather, Black Cubic Trim