Sounds like they may be correct and that it is an evaporator. The price however is excessive... I just had the evaporator in my 2004 X5 done at an indy for $1600.00. The parts were $600 (OEM not aftermarket... Be careful here...) and labor was $1000. They took the entire dash out of the car right back to the firewall... The x3 cannot be that different. I would shop around for a better price.