Two problems related to transmission slip out of gear have been reported for the 2003 BMW M3. The most recently reported issues are listed below.
Smg hydraulic pump: I was driving on the highway at 65 mph in the #1 lane and my car all of a sudden dropped out of gear and my car started to coast losing speed very fast, I looked at my speedometer and it was 45 mph. Cars were honking and high beaming me but I was helpless and was trying to move to the right with my hazard lights on. All of a sudden the car kicked back into gear, I was able to accelerate and exit the highway. I went to research the problem and found out it is a very common scary problem these cars have. There are thousands of complaints on this subject. Very scary situation, I am glad my kids or wife was not driving the car at the time. I hope BMW steps up to the plate and proactively takes care of this before tragedy strikes.
While driving on a relatively hot day (92 degrees f), my vehicle's smg (sequential manual gearbox) malfunction indicator light turned on and I began having problems with the vehicle randomly dropping out of gear into neutral or "0" for 6-15 seconds at a time. When out of gear, there was a complete loss of power. On one instance of dropping out of gear, I was turning right at around 10-15 mph when I found I could not accelerate and an oncoming vehicle almost ran into me. Since the first occurrence of this, this type of "stalling" has happened much more frequently when the ambient temperature reaches above 90 degrees, and now I cannot drive longer than 30 minutes without the smg mil turning on and gears start dropping. I'm concerned that this may happen at higher speeds and leave me stranded on a highway or even in stop-and-go traffic, where it seems to occur very frequently. I've researched many forums for this and have found this to be a common issue with other M3 smg owners. There is some indication from other owners that the issue might be linked to a hydraulic temperature sensor located on the main smg hydraulic pump but I have not found any information from BMW detailing a repair for this type of issue. The only option seems to be a full replacement of the hydraulic pump, which has already been done on my vehicle once before for a similar issue. This type of replacement costs almost $4000 as quoted by the dealer. I think BMW should get serious about this issue and conduct an investigation on potential campaign remedies.