I have a 1992 300TE. When it shifts from 2nd to 3rd at around 25mph with slow acceleration, a "thud" sound appears to be coming from somewhere around the rear axle area. Could this be a problem with the drive shaft or universal joint or am I on the wrong track?

Could be a number of things. Does it occur when backing up?? It could be a bad flex connector, CV joint or something inside the differential. With the W124 series, the 2nd to 3rd transition can be a bit hard. Most likely suspect is excessive backlash in the rear end..

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Jeff Lawrence
1987 300e
1989 300e
1987 BMW 325

It does not happen when backing up. It has always been rough going from 1st to 2nd with a bit of a jump. I have had the boden cable adjusted, which helped some. Also recently had the flex disc chaged as it was cracked.

A possible related problem is the transmission does not shift correctly at times, especially on cold start. It revs to 3000 before shifting up a gear. Once it goes through the gears one time, it is fine shifting, other than the "thud" from 2nd to 3rd.

Possible problem with vacuum modulator. Make sure the vacuum line is intact and connected. The modulator is on the left side of the tranny aft of the selector lever. If this is not operating correctly, it can give you hard shifts. Do you hear any "clunks or thuds" when you go from neutral to drive or reverse??

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Jeff Lawrence
1987 300e
1989 300e
1987 BMW 325

Other than getting your shifts right with modulator adjustment, I would check the rear mounts for the differential. They go into the subframe and are about <2inches in diameter with a open rubber connection center to outer. Wear will cause the kind of clunk you describe as the differential flops back and forth.

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Steve Brotherton
Owner 24 bay BSC
Bosch Master, ASE master L1
26 years MB technician

It might be worth getting under there and shaking your muffler to make sure it's secure.