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Increasing complexity of automotive systems along with growing safety and performance requirements, is causing development cycle costs to swell. A common solution is to use a Model-Based Design (MBD) approach, particularly using x-In the Loop (xIL) simulation methods for Validation and Verification (V&V). MBD allows efficient workflow from offline control design using high-fidelity models to real time V&V using Hardware-in-the-Loop (HIL) simulations. It is very challenging to reduce the complex non-linear high-fidelity models to real-time capable models for HIL simulation. Current literature does not provide a standard approach for obtaining the HIL-capable reduced model for complex non-linear systems. In this paper we present an approach to perform model reduction in light of HIL-level requirements. The approach is presented using an example of a 10-speed automatic transmission. The system constitutes three subsystems - the hydraulic network, mechanical gearbox, and torque converter.