Diesel locomotive Calabro Lucane in southern Italy in 1926, following trials in 1924-5. In 1924, two diesel–electric locomotives were taken in service by the Soviet railways, almost at one time: In 1935, Krauss-Maffei, MAN and Voith built the first diesel–hydraulic locomotive, called V 140, in Germany. The German railways (DRG) being very pleased with the performance of that engine, diesel–hydraulics became the mainstream in diesel locomotives in Germany. Serial production of diesel locomotives in Germany began after World War II. In many railway stations and industrial compounds, steam shunters had to be kept hot during lots of breaks between scattered short tasks.
Diesel locomotive was uneconomical to apply to lower-traffic areas. The first regular use of diesel–electric locomotives was in switching (shunter) applications, which were more forgiving than mainline applications of the limitations of contemporary diesel technology and where the idling economy of diesel relative to steam would be most beneficial. GE entered a collaboration with the American Locomotive Company (ALCO) and Ingersoll-Rand (the "AGEIR" consortium) in 1924 to produce a prototype "boxcab" locomotive delivered in July 1925. This locomotive demonstrated that the diesel–electric power unit could provide many of the benefits of an electric locomotive without the railroad having to bear the sizeable