What will cause this to happen in a 208 Transfer Case (Pic Inside)

[Nasty-LSX]

My speedo went out. I bought a new gear and it failed after a few miles. I put my finger in the speedo hole
and could feel the plastic melted/shaved up. I pulled the T/C cone off and the gear is chewed up on one end.
Is this normal. its almost like there was no oil in the rear part. Im sure there must have because when I pulled
the cone off, oil came out.

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[bucket]

What does the driven gear look like?

 

[vr1967]

Make sure your speedo cable isn’t binding, lube it. I’ve been able to pull the center out of some and smear grease on it and reinstall, make sure it turns easily. Check the driven gear as mentioned. You should be able to turn that drive gear around and reuse, as it doesn’t look bad. The drive gears are getting hard to find, the driven are still common.

 

[Nasty-LSX]

Yall wont believe this, Ill post a update tomorrow with pic's!