Since the Spreckels' interests now controlled the San Diego Electric Railway, the National City & Otay Railway and the Coronado Railroad, it was obvious that economies could be effected by changes in the set-ups. Accordingly a new corporation, named San Diego Southern Railway Company, was formed by J. D. Spreckels and others in January 1908. The articles of incorporation provided for a railroad from San Diego in a general southerly direction to a point at or near Ensenada in Lower California; to Coronado and a third via Sweetwater Valley to La Presa, Jamacha Valley and on to Lakeside. The third extension, if constructed, would severely compete with the San Diego, Cuyamaca & Eastern Railway.
Effective July 1, 1908 the San Diego Southern took over the steam divisions of the Coronado Railroad and the National City & Otay Ry. and the electric interurban line of the latter. At the same time, the electric division of the Coronado RR. was "sold" to the San Diego Electric Ry., it thus acquiring electric cars numbers 41, 42 and 43 and re-acquiring "box car" number 44. The four trailers, used with the electrics, were included, also one horse car and a small line tower car (non-electric).
National City & Otay interurban cars numbers 101 to 104 inclusive were relettered "San Diego Southern Railway", as were four coaches from the Coronado RR which were used as trailers.
Six new interurban type cars were purchased from the Niles Car Company in 1908. They were of California design but were a little shorter than the National City built cars. These were numbered 105 to 110 inclusive. Three of them, numbers 105, 106 and 107 were retained by the San Diego Southern. The other three were transferred to the San Diego Electric Ry. in 1909 and 1910. The numbers were changed, on the books, to 401, 402 and 400 respectively but not on the cars until 1911.
The Electric Division was extended from Chula Vista south to Otay, 2.1 miles, in October 1909. That was as near to Ensenada as the electric cars ever ran. Another change was made in 1910 when a connecting track was laid in San Diego by the San Diego Electric Ry. on 13th St., from L St. to K St., making the route of the interurbans from Newton Ave., on 13th St., to K St., to 5th Ave. and so on to the Santa Fe station.
The company applied for a franchise to operate an express service but the request became involved in the controversies of J. D. and the San Diego Electric Ry. versus the San Diego City Council over a 50 year term for street railway franchises and a two percent gross revenue tax, delaying the issuance of the permits. The company also petitioned for permission to operate a railway express service from the center of the city to Ocean Beach over the Point Loma Railroad. Finally the permits were granted, authorizing one express car to operate through the city making a limited number of trips.
Combination baggage and passenger car No. 5 of the Coronado RR. was rebuilt by the San Diego Electric Ry., converting it to electric, in March 1910. It was lettered and numbered San Diego Southern Railway No. 111.
Express service was started under the direction of Wells-Fargo & Company. One run to Ocean Beach was made daily except Sunday beginning in mid July.
The San Diego Southern Railway was merged along with the San Diego & Cuyamaca Railway into the San Diego & South Eastern Railway Company in 1912.