Fenqihu Station played a pivotal role in the smooth operation of the Alishan Forest Railway. Situated at a strategic junction, it served as a vital loco shed, sharing the burden of maintenance tasks with two other major loco sheds. This ensured that trains could seamlessly navigate the challenging mountainous route. In the early days of the railway, a journey to the summit of Alishan required a nine-hour ascent. After changing locomotives at Zhuqi Station, the train would pass through Mululiao, Zhangnaoliao, Dulishan, and Liyuanliao before arriving at Fenqihu Station. As the largest intermediate station on the route between Chiayi and Alishan stations, Fenqihu Station was a critical stop for all passing trains. Here, locomotives underwent replenishment and inspections, and some trains even switched engines before continuing their journey to Alishan.

Initially, the Alishan Forest Railway served primarily for timber transportation. However, as its freight and passenger capacity expanded, Fenqihu Station evolved into a collection and transshipment point for a diverse array of mountain produce. Freight cars carried an abundance of local delicacies, including chayote, dried bamboo shoots, peaches, plums, and other fruits. Additionally, merchants selling everyday goods would board trains at Fenqihu to conduct business. This bustling freight traffic fueled the commercial prosperity of the Fenqihu settlement.