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Further fuel efficiency improvements are mandatory in order to achieve the CO2 emission limits envisaged in the future. Electrification of the powertrain is seen as one of the key technologies to achieve these future goals. However, electrification of the power train typically goes with a massive cost increase of the overall system itself which is especially crucial for cost sensitive markets like India. AVL's approach to cost reduction for comparable performance and fuel consumption target values is an integration of functions. This paper demonstrates that, through a deeper interaction of the single powertrain components, further fuel efficiency optimization may be gained. System optimization at a powertrain level enables the achievement of future powertrain targets with respect to fuel efficiency and performance with only minimal and reduced requirements at a component level (i.e. combustion engine, electric drive, transmission and battery).