You need both a MKIV and a current BM53/BM54 radio to get the full MP3 support.

If you do not have the radio & nav, then the MP3 will still work, but it will just show many tracks with no ID3 information on the display.

Based on the year of your car, you have the MKIV. So, you just need to update the radio and add the current CDC.

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SOLD
2000 E38 750iL Highline Edition, Upgraded with the lastest 2006 X5 Electronics
MKIV Navigation, 16:9 Display, Bluetooth, TV/Video with Backup Camera, Sirius, and Aux Input