Here's how an automatic transmission works in your passenger automobile.
The automatic transmission is responsible for providing a selection of gear ratios between the engine and drive wheels of a car. The transmission uses the principle of planetary gears, which are always meshed together to vary gear ratios. This results in speed reductions and torque multiplication.
Most gasoline engines are tuned to generate more power as the RPM increases. Thus a low gear ratio, which multiplies torque, helps a vehicle to take off from a stop. Once inertia is achieved and the vehicle is coasting, the transmission will engage the next gear, resulting in a speed increase.
Increasing the speed output also decreases the amount of fuel an engine will consume, since it will be rotating at a slower RPM for a given output. Newer transmissions may have 6, 7, 8, 9 and upto 10 speed ratios to choose from! The downside to having too many gears is that the tranny will tend to hunt or get confused as to which is the optimal gear to be in at a given throttle input.
In this video an automatic transmission from a Toyota Corolla is torn down to the basics to show it works. The main components include the input shaft, planetary gearset, one way clutch, clutch discs and bands, valve body, case, countershaft, differential, oil pump and torque converter. This transmission is the 4 speed automatic transmission (A245E) used in Corollas from 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008.
A full writeup and discussion of this transmission breakdown can be found here:
More information on how the torque converter can be found in my separate video here:
The removal of the engine and transmission:
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How An Automatic Transmission Works