The signal is generated at the front balancer and converted to DC pulse signal by a transducer mounted into the diagnostic socket. The signal is then used by the tach. If the tach is bad it is usually the capacitors.
With gas cars a bad tach is usually the tach, with your model diesel it is usually the transducer. Unscrew it and move it up an down in the contacts. It is such a low voltage signal that sometimes the contact is poor.
Bosch Master, ASE Master, L1
33 years MB technician