Although the Mount Kŭmgang area had long been one of the most famous places in Korea for mountain sightseeing,[1] access was difficult due to the severe topography and poor roads.

Although geography and topography did play a role in the decision to build an electrified rail line, the primary motivation for the electrification was that the company was the possibility of constructing a number of hydroelectric power plants in the Kumgangsan area using the pumped-storage system - which at the time counted as advanced technology.

[4] The Chosen Hydropower Company (朝鮮水力電気株式会社, Chōsen Suiryokudenki Kabushiki Kaisha; 조선 수력전기 주식회사, Chosŏn Suryŏgjŏn'gi Chusikhoesa) had held the water rights to the rivers in the area.

[4] On 22 August 1919, a meeting was held for the organisation of the Kŭmgangsan Electric Railway Company, Ltd., and 100,000 shares were issued to raise funds for the project, of which 20,000 were allocated for the recruitment of general investors.

The economic boom and the optimism of the post-First World War period played a major role in the great interest in these shares.

[4] In 1923 the first phase of construction of the railway and the hydropower stations was completed, and the opening of the line for revenue operation was scheduled for November 1923.

However, the Great Kantō earthquake of that year destroyed the electric generators for the trains which had been ordered from Shibaura Manufacturing in Tokyo, setting the plans back.

To compensate, steam locomotives and passenger coaches were borrowed from the South Manchuria Railway, and with these, revenue service was started on the 28.8 km (17.9 mi) section from Ch'ŏrwŏn and Kimhwa on 1 August 1924.

For the Kŭmgangsan Electric Railway, whose operating profits were initially not as high as had been expected, these subsidies proved to be of great significance.

[4] The Kŭmgangsan Electric Railway's 116.6 km (72.5 mi) line finally reached Naegŭmgang on 1 July 1931, with trains over the entire length of the route beginning on that day.

Tourists flocked to the railway, taking advantage of the available single and group tours, and in 1936 the line carried approximately 154,000 passengers.

[10] The development of industries in the region also played a large part in the company's turnaround, as several quarries were opened along the line, along with iron sulphide (chalcopyrite) mines around Changdo.

[4] However, the outbreak of the war changed circumstances, and wartime considerations led to the merger of all electric utilities on the Korean Peninsula into four regional companies, north, central, west, and south.

[4] When Sentetsu began to implement its plans to electrify its Kyŏngwŏn, Kyŏnggyŏng and Kyŏngin lines at the end of the 1930s,[12] electric locomotives were ordered from Mitsubishi and Toshiba.

[10] The section on the Northern side is partially submerged as a result of the construction of the Imnam Dam, but some traces, such as bridge piers, can still be found, and certain segments of the right of way can be seen in aerial and satellite photos.

[18] The entire line was built to 1,435 mm (4 ft 8.5 in) standard gauge and was electrified with 1,500 V DC, with current collection taking place via pantographs from the catenary.

As such, when the trains from Ch'ŏrwŏn to Kimwha began operation, a connecting bus service from Kimhwa to Naegŭmgang was begun at the same time.

As the rail line was extended in stages to Kŭmsŏng, T'an'gam, Changdo, Hyŏlli, Hwagye, and Kŭmganggu (later Malhwiri), the bus run was shortened in turn, beginning at the then-current terminus of the railway.

[4] The Korea Expo held from 12 September to 31 October 1929 played a major role in establishing the Kŭmgangsan Electric Railway, carrying a large number of Korean tourists to Mount Kŭmgang.

[4] Passenger trains were made up of four-car electric trainsets with second- and third-class compartments in addition to baggage rooms.

[19] In addition to passenger traffic, the movement of freight was also an important source of revenue for the Kŭmgangsan Electric Railway, with shipments of ore making up the bulk of all transportation during the November−April off season.

Most of the freight was iron sulphide being moved from the mines at Changdo to the Chosen Nitrogenous Fertilizer Company (朝鮮窒素肥料株式会社 Chōsen Chisso Hiryō Kabushiki Kaisha, 조선 질소 비료 주식회사 Joseon Jilso Biryo Jusikhoesa) factory in Hŭngnam.