New factories used machines and electricity in place of horses.

What is the object of the preposition in place of?

Objects of prepositions are the elements preceded by a preposition which add the necessary information to complete them.

New factories used machines and electricity in place of horses.

Explanation: in this sentence, there is only one preposition (in place of) and its object cannot be other than what follows it (horses). In general, objects of prepositions are nouns.