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The all-time speed record for steam trains is held by an LNER Class A4 4-6-2 Pacific locomotive of the LNER in the United Kingdom, number 4468 Mallard, which pulling six carriages (plus a dynamometer car) reached 126 mph (203 km/h) on a slight downhill gradient down Stoke Bank on 3 July 1938. Aerodynamic passenger locomotives in Germany attained speeds very close to this and due to the difficulties of adequately balancing and lubricating the running gear, this is generally thought to be close to the practicable limit for a direct-coupled steam locomotive.
Before the middle of the 20th century, electric and diesel-electric locomotives began replacing steam locomotives. Steam locomotives are less efficient than their more modern diesel and electric counterparts and require much greater manpower to operate and service. British Rail figures showed the cost of crewing and fuelling a steam locomotive was some two and a half times that of diesel power, and the daily mileage achievable was far lower. As labour costs rose, particularly after the second world war, non-steam technologies became much more cost-efficient. By the end of the 1960s–1970s, most western countries had completely replaced steam locomotives in passenger service. Freight locomotives generally were replaced later. Other designs, such as locomotives powered by gas turbines, have been experimented with, but have seen little use, mainly due to high fuel costs.
By the end of the 20th century, almost the only steam power still in regular use in North America and Western European countries was on heritage railways largely aimed at tourists and/or railroad hobbyists, known as 'railfans' or 'railway enthusiasts', although some narrow gauge lines in Germany which form part of the public transport system, running to all-year-round timetables retain steam for all or part of their motive power. Steam locomotives remained in commercial use in parts of Mexico into the late 1970s. Steam locomotives were in regular use until 2004 in the People's Republic of China, where coal is a much more abundant resource than petroleum for diesel fuel. India switched over from steam-powered trains to electric and diesel-powered trains in the 1980s, except heritage trains. In some mountainous and high altitude rail lines, steam engines remain in use because they are less affected by reduced air pressure than diesel engines. Steam locomotives remained in routine passenger use in South Africa until the late 1990s, but are now reserved to tourist trains. In Zimbabwe steam locomotives are still used on shunting duties around Bulawayo and on some regular freight services.
As of 2006 DLM AG (Switzerland) continues to manufacture new steam locomotives.
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