It is very likely that they used this pickup to provide input signal to an off-the-shelf (RPM gauge) tachometer. The same way we use a few turns of wire around a coil HV wire to get signal for OnlineCourse/AlienIgnitionLogging
This could be used as a cam position sensor if the distributor is maintained (but than cam position is not interesting at all). In case
- wasted spark is applied (highly recommended) the cam position from the given wire is not needed (and not available anyway)
- fully sequential ignition (COP) is applied (eg. for IonSense), something (a small HALL or optical sensor) inside the remains of the distributor (where distributor is not used for distributing spark any longer) could be used for cam-sync.
I guessed it's a cam pos signal because VR signal already exists (to drive RPM gauge?). Wiring is quite stock form (has a plug in a socket to 2 plugs and wire goes to the original harness). I've seen such a sensor on other similar BMWs also.
Nevertheless, I may or may not use this signal, we'll see. Motronic uses bank injection (2 banks for 6 cyls), so cam signal is not needed for that. Even if the 6 injectors are fired individually, cam signal is not needed (unless timed sequential injection is applied and tuned to squeeze the last bit of economy and emissions).
(The ring on ignition wire near to distributor)
The connection to harness:
