When were elephants first used in war and how far were they effective?

The military potential of the elephant was recognized by generals thousands of years ago. Elephants were the first tanks, for in ancient warfare they served a function similar to that of armour today; the generals of ancient India fashioned their tactics around the deployment of war elephants.
The Indian armies were composed of four divisions — cavalry, chariots, infantry and troop-carrying elephants. Ridden by lancers and bowmen, the elephants were shielded with heavy leather, their tusks were tipped with spikes, and sometimes the pachyderms were even trained to wield swords with their trunks making them an altogether terrifying weapon.
Understandably, armies opposing elephants for the first time tended bo break and run at the sight of these animals. However, there was a catch to the effective use of elephants in war: Once the opposition learned that elephants panicked easily, means of thwarting the beasts were quickly devised. Fire, concerted discharge of arrows, and mobile cavalry all served to counter an assault by elephant troops. Once burned, stung by a rain of arrows, or frightened by horsemen dashing among them and jabbing them with lances and swords, elephants were as likely to stampede through their own army as through the ranks of enemy.
Additional reading:
War elephant (Wikipedia)

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