Network extensions soon followed, such as the North-South route from Schwabing to the foot of the Theresienhöhe. These basic routes were further expanded in the 1880s to account for the development of the growing state capital. For this reason, the then fringe  areas, such as Ostbahnhof, Giesing, Neuhausen and Sendling were connected to the tram network early on. Likewise, the excursion areas close to the city were also developed.

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Until February 1878 Otlet was as per contract the sole owner of the Munich horse tram, but he needed French capital for the operations. On April 25, 1878, he founded the Société Anonyme des Tramways de Munich, based in Brussels. In addition to Otlet, the supervisory board included Paris-based entrepreneurs Dervieu and Guillaumeron, who contributed a share capital of five million francs. The Munich stores were run by Enrico Treize-Dreys, who however barely mastered the German language. The Munich City Council did not approve of the new company constellation, disputes and lawsuits came to pass. Bailiffs tried to seize the daily revenues, but some dextrous conductors hurriedly took them to safety by hiding them in several private apartments.

Treize-Dreys was replaced in 1879 by a Lorraine Frenchman, Msr. Cambier, followed in May 1880 by Franz Heinen, who ran the business until 1882.

In January 1882, the Magistrate refused concession to the Belgian-French company because of the many disputes and forced the re-founding of a German society.

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On August 25, 1882 the management of Otlet's horse-drawn tram was transferred to the newly founded Munich Tramway Public Company (MTAG), governed by director Ercole Graziadei, an Italian count. He was followed in 1898 by Engineer Georg Hippe, who had been employed by the horse tram since 1877. Chairman of the Supervisory Board was the merchant Johann Michael Gerdeissen, followed in 1885 by Judge Theodor Riegel. The capital of the corporation initially amounted to 2 million marks and had risen to 4 million marks by 1890. The City secured a tiered profit share, depending on gross revenue, from 2% to 3%. MTAG received its operating license for 25 years and was conclusively wound up on  January 1, 1907.

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Following the founding of MTAG, orders for new cars were awarded to German companies. On the blue painted spaces between the roof and the windows "Münchener Trambahn" would be written in red color . On the side walls on one side the "Münchner Kindl" coat of arms was placed, on the other side the Bavaria coat of arms with its white and blue diamonds. To distinguish the individual lines, direction signs were mounted on the roofs of the tram cars. Each line was assigned a different color. An attempt made in 1887 to introduce a sulfur yellow and black offset paint according to the Munich City colors, failed because of the noisy protest of the citizens.

By 1895, a total of 150 closed cars, two half-open cars and 137 open summer cars were procured. A singular double-decker  car , named "The Imperial" was obtained in 1878 . Its upper deck was not availabe to use by women "for moral reasons" and prohibited through the police. It remained a maverick.

The highest stock of horses was reached in 1894 with 797 animals.

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On June 9, 1883, MTAG opened the first steam tram line in Southern Germany from Stiglmaierplatz to Nymphenburg. This line was very busy, especially on the weekends.

For this line, the company Krauss & Co. delivered a total of seven steam locomotives that could be trailed each with a maximum of five cars. 13 closed and 20 open trailers had been purchased for this occasion.

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The beginnings of the electric tram in Munich dated from July 1, 1886: On this day, the first train of the Ungererbahn covered the distance of approximately one kilometer between the Schwabinger Großwirt, not too far away from the last stop of the horse tram, and the "Schwabinger Würmbad".
This railroad, incidentally only the third electric railway in the world - was set up as a private feeder train by the bath owner and engineer August Ungerer to transport the guests to his "Ungererbath". In 1895 it was curiously replaced by the horse tram.

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To master the growing inner city traffic the carriages of the horse tram ran from  June 16, 1888 on a "old town crossing line", the so-called "classical route" from the main station over Stachus, Marienplatz and Tal to the Isartorplatz.

In 1890 the MTAG also opened the first ring line, which served the inner ring: Central Station - Stachus - Sendlinger Tor Platz - Isartorplatz - Max II Monument - Galeriestraße - Ludwigsstraße - Theresienstraße - Augustenstraße - Central Station. In 1892 the length of the route of the operating network of Munich horse and steam trams was already more than 42 kilometers.

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But there were also difficulties: The financial possibilities of MTAG, which had possession of a valid concession only up to 1907, were running within a tight framework.

Some suburbs, such as Bogenhausen and Thalkirchen, which had not yet been connected to the line network, therefore requested their own companies, which were to compete with MTAG for faster transport links.

These plans, however, were thwarted by the Municipality of Munich, which in turn brought the MTAG under its control with the "Operation Agreement of February 17, 1892" and forced them to build new lines at community costs.

Therefore two "community routes": Färbergraben - Isartalbahnhof and Hauptbahnhof - Giesing were built in the same year.

For their supervision, a separate board was set up, from which soon the "Trambahn Committee" was formed at the community councils, which became the controlling body of the entire company.

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From the first ride on the Ungererbahn to the continuation of the electrification, another nine years passed. It was not until 1894 that the City Council approved the electrification of the municipal lines.

On June 23, 1895, a form of mixed operation was taken up on the first line Färbergraben - Isartalbahnhof, meaning the first four electric cars were running in between the horse trams. A few days later, the switch to entirely electric operations and the attachment of an former horse trolley as a trailer took place.

In the same year the second municipal line from Central Station to Giesing was electrified. From 1895 (the electrification of the Munich Tram) until 1989 a total of 32 small two-axle cars were obtained in six series. Manufacturers were the Union-Elektricitäts- Company, Schuckert & Co. and the Wroclaw Wagon Factory; a single piece was created by Kummer in Niedersedlitz.

At first, the cars were numbered from 1-32; from 1908 the car then were assigned numbers from 351. The cars were quite small, offering only space for 28 passengers (16 of which were seats); they proved to be quite quickly as too small. The transport companies decided against another order for this car and for the procurement of the four-axle type A. After various modifications the first few cars were converted to working and also postal carriages, starting in 1905. From 1921 another badge of cars was converted to trailers; unfortunately, no car of this type exists today.

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Parallel to the electrification, the route was expanded further to meet the growing demands on public passenger transportation. Still electrification also progressed: the conversion of the entire line network to electrical operations was completed within five years. The last steam tram reversed on July 15 ,1900, the last horse tram on November 1, 1900.

As part of the conversion operation, however, not all lines were taken on by the "Electric", but a few short sections were given up as well. Since on "highest order" of the Prince Regent Luitpold a catenary in the Brienner road and on the Odeonsplatz was undesirable, tram trains with accumulator traction engines were frequenting on this section from 1900 to 1906 .

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