The canal enabled lumber from the mountains to be transported by water from southern Bohemia to Vienna. Within two years, the 40-kilometre long navigational canal had been carved out of the rugged mountains, but that was the end of it. The Napoleonic Wars brought grand projects and progress to a halt as the European world froze impotent at the feet of the French. It was the demand for salt and a more economical method of shipping it that revived the canal idea at the dawn of the Industrial Revolution. Continental Europe was reawakened and ambitious.

Since the Danube River in Hungary had been successfully linked to other important waterways, Austrian Dr. Franz Josef von Gerstner, Professor of Mathematics in the University of Prague, was choosen to study the canal idea. He found construction of a Canal was not feasible with its estimated need of 290 locks! However, he proposed the construction of a railway line, a transport medium of which he had heard about from England, and he advocated a horse railway from Linz to Joachismühle in 1807, but he left the project in the hands of his son, Franz Anton Gerstner, himself a professor of engineering in Vienna.

The young Gerstner built a model which he brought to the Royal Palace in Vienna where Emperor Franz I granted him the exclusive right to start work, and in September, 1824, the building of a wood and iron road between Mauthausen on the Danube and Budweis, situated on the Moldau. The First Austrian Railway Company was formed, the old Salt Route becoming an integral part of the new horse-drawn railway.

On July 28, 1825 in Böhemia near Netrobitz, the work began. The establishment of a railway was a new idea and great difficulties arose from the beginning, but in September, 1827 the first trains ran between Trojern and Budweis, and the 129 kilometre journey could now be completed in 14 hours, instead of three days. The horse-railway could handle loads three-times heavier than could normal roads and it was solid enough to be adapted for use by the steam-engine trains later.

In April, 1829 after almost four years, the line was extended from Budweis to Pramhöf, and then later to Urfahr. The historic horse-drawn railroad which linked Gmunden to Budweis in the 1830s was the first railway on the European continent, and was built with the main purpose of facilitating and enhancing the transportation of salt from Upper Austria to Bohemia. However, it was used by passengers as well.

The first cars were both open and covered. They had up to 24 seats and were divided into three classes. Passengers could transport their personal horses on special cars. On July 21, 1832, Kaiser Franz I and Kaiserine Karoline Augusta arrived in an open car at Magdalena, “one of the most graceful places, with beautiful, steep mountains in the midst of the most sumptuous vegetation, a place under the fair shade of the largest lime tree” as described by guide books.

By the spring of 1835, the tracks crossed over the wooden Danube bridge from Urfahr connecting to Linz, and the horse railway from Budweis Urfahr was connected with the Linz line, already in construction. The horse railway used around the 600 horses, from which most were sturdy, rugged and well-tempered Norik horses. They were bedecked with bells to herald their arrival. One horse generally drew two or three carriages.

Gerstner built lighter cars for the horses to pull than those used in England, and he suggested that wood wheels with iron hubs and bearings be used in place of heavy cast-iron wheels. Thus the Norik mastered a outstanding daily performance of 40 km. and at greater speed with less stress. The company owned about 1,000 trucks with a load weight amounting to 2.5 to 3.5 tons. The main freight was salt with an average of 40 barrels. Stations maintained stables for 25 to 100 horses, blacksmiths and other workshops. In addition there was usually a restaurant for passengers.

Gerstner had run well over budget on the project, and unwilling to compromise with the project financiers, he was fired and left for Russia, where he could build his railroads in relative peace. Once in Russia, von Gerstner pushed through his proposal to build the St. Petersburg-Tsarskoe Selo Railway in 1836. This inaugurated the start of railways in Russia.

By 1857, the railroad owned 96 passenger vehicles. After a time, employees wore hats and badges and kept bottles of liquor, lanterns, and tools for horse fitting and quick repairs. Farmhands soon discovered it was to their benefit to be polite and even entertain travelers, and some became rather well-known for their singing and musical performances. One farmhand became famous after he amassed a fortune amusing and entertaining passengers. The Austrian built Horse Railway was so successful that Vienna wanted its own, and soon the Viennese Tramway developed and in the following years dominated the transport enterprise of Vienna. Lines and stations were constructed all over the city, and people enthusiastically travelled in style.

The building of the horse railway was a pioneering technical achievement. Carrying 190,000 persons and 100,000 tons of goods in those years was unique for its time. Around 1855, however, the passenger trains changed over from horses to steam engines, although the horse line continued with other duties until it became impractical. The last regular course drawn by horses operated on December 15, 1872.