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Check that you have added the smoke fluid (oil) to the engine and that it has not run dry. The smoke from the engine is generated by a small chamber with a heating element built in. The heating element gets hot as the loco runs and heats the smoke fluid up which in turn creates the steam/smoke. If there is no fluid the heating element can over heat and will smell as you describe. Not sure if your model has a smoke effect on/off switch, if it has switch it off if you do require the smoke effect.