Automatic transmission fluid is traditionally dyed red to make leaks easier to identify.
The bright color helps distinguish ATF from engine oil and other automotive fluids, especially when a vehicle leaves a puddle or when fluid is found around a transmission pan, cooler line, or seal. Red dye became particularly associated with American automatic-transmission fluids and was used as a leak-detection aid.
General Motors’ DEXRON-B specification, introduced in 1967, was the first GM ATF specification to require red dye for that purpose. Earlier GM automatic-transmission fluid could look much like engine oil, making leaks harder to identify by sight.
Red is a useful traditional clue, not a universal rule. Some modern fluids are dyed green, blue, or another color, and used ATF often darkens to brown or nearly black. Color alone cannot reliably identify the correct replacement fluid or prove that it is still serviceable; the vehicle manufacturer’s specification and maintenance guidance matter more.