In order to achieve greater fuel economy, it is desirable to operate the engine on a prescribed schedule of rpm and bmep for each load condition. To accomplish this, a continuously variable transmission is used to establish the proper ratio for each horsepower requirement, and this ratio has to vary continuously with variation of load imposed on the engine. A simulation study is made to show the fuel economy achieved with a hydromechanical transmission, as compared to a conventional automatic transmission. For comparison, both engine-transmission combinations were studied over identical city and suburban driving cycles, taking into account the losses in the transmissions, as well as the inertia of the components during acceleration and deceleration. The hydromechanical transmission is used in this study, because it presents a near-term solution to the fuel economy problems. All of the parts that make up such a transmission are well-known state-of-the art components, thereby considerably reducing the required development time.