While a logger, Ephraim Shay wanted to find a new way to get logs to the mill, besides winter snow sleds. He built his own tramway in 1875, on 26 inch (66 cm) gauge track on wooden ties. This was very efficient and enabled him to beat his competitors because he saved so much money with the tram and could log year round.
Two years would pass before he would invent the Shay Locomotive. In about 1877 he developed the idea of having an engine sit on a flat car with a boiler, gears, and trucks that could pivot. The first Shay only had two cylinders and the front truck was mounted normally while the rear truck was mounted fixed to the frame and could not swivel, much as normal drivers on a locomotive. He mounted the 3' diameter by 5' tall boiler centered on the car with the water tank over the front trucks and the Crippen's engine mounted crossways over the rear trucks. Shay experimented first with a chain drive from the engine through the floor to the truck axle. It is not known if he powered one or both axles however he soon found that the chain drive would not work for him and he next tried a belt drive. It did not take long for the idea to become popular.
Lima Locomotive Works of Lima, Ohio built Ephriam Shay's prototype engine in 1880. Prior to 1884, all the Shays Lima produced weighed 10 to 15 tons each and had just two cylinders. In 1884, they delivered the first 3-cylinder (Class B) Shay, and in 1885, the first 3-truck (Class C) Shay. The success of the Shay led to a major expansion and reorganization of the Lima company. When Lima first received the Shay idea it was not impressed, until John Carnes influenced the company to use the idea, resulting in the classic Shay design.
In 1903, Lima could claim that it had delivered the "heaviest locomotive on drivers in the world," the first 4-truck (class D) Shay, weighing 140 tons. This was built for the El Paso Rock Island line from Alamogordo, New Mexico to Cox Canyon, 31 miles away over winding curves and grades of up to 6%. The use of a two-truck tender was forced by the fact that the locomotive to carry enough water for a round trip because of the poor water quality along the line.
After the basic Shay patents had expired, Willamette Iron and Steel Works of Portland, Oregon, manufactured Shay-type locomotives, and in 1927, Willamette obtained a patent on an improved geared truck for such locomotives. Since "Shay" was a trademark of Lima, strictly speaking it is incorrect to refer to locomotives manufactured by Willamette and others as "Shays." Six Shay Patent locomotives, known as Henderson-style Shays, were built by the Michigan Iron Works in Cadillac, Michigan.