After the P-33's 25 inch diameter cylinders were too large for the boiler, they had to be downsized to 23.5 inches. By increasing the grate area from 45 to 63 square feet, the P-40 class was born. They could now even enlarge the cylinders to 25.5 inches and still have enough steam. Like the P-33, it was oil fired.

A passenger train consisting of twelve cars and weighing 900 short tons was chosen to determine the pulling power. A one percent steep, six-mile incline was begun at 35 mph and averaged 27 mph without the boiler pressure dropping. In contrast to the previous locomotives, it was not necessary to subsequently install a booster or thermic siphons. 

In contrast to the P-33, the P-40 was not built by ALCO's Schenectady plant, but by ALCO-Brooks. With 30 locomotives, however, a smaller number was produced than with its predecessor. The first were retired in the late 1930s, the last in 1952.