There is a growing interest in hybrid electric vehicles due to environmental concerns. Recent efforts are directed toward developing an improved main component system for the hybrid electric vehicle applications. Soon after the introduction of electric starter for internal combustion engine early this century, despite being energy efficient and nonpolluting, electric vehicle lost the battle completely to internal combustion engine due to its limited range and inferior performance. Hybrid electric vehicles offer the most promising solutions to reduce the emission of vehicles.This paper describes a method for cost reduction estimation of hybrid electric vehicle. We used a cost reduction structure that consisted of five major subsystems (three types battery and two types motor) for hybrid electric vehicle. Especially, we estimated the potential for cost reductions in hybrid electric vehicle as a function of time using the learning curve. Also, we estimated the potentials of cost by deprecation.