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Only a part of the energy released from the fuel during combustion is converted to useful work in an engine. The remaining energy is wasted and the exhaust stream is a dominant source of the overall wasted energy. There is renewed interest in the conversion of this energy to increase the fuel efficiency of vehicles. There are several ways this can be accomplished. This work involves the utilization thermoelectric (TE) materials which have the capability to convert heat directly into electricity. A model was developed to study the feasibility of the concept. A Design of Experiment was performed to improve the design on the basis of higher power generation and less TE mass, backpressure, and response time. Results suggest that it is possible to construct a realistic device that can convert part of the wasted exhaust energy into electricity thereby improving the fuel economy of a gas-electric hybrid vehicle.