Thermoelectric generator has very quickly become a hot research topic in the last five years because its broad application area and very attractive features such as no moving parts, low maintenance, variety of thermoelectric materials that total together cover a wide temperature range. The biggest disadvantage of the thermoelectric generator is its low conversion efficiency. So that when design and manufacture a thermoelectric generator for exhaust waste heat recovery from an automotive engine, the benefit of fuel consumption from applying a thermoelectric generator would be very sensitive to the weight, the dimensions, the cost and the practical conversion efficiency. Additionally, the exhaust gas conditions vary with the change of engine operating point. This creates a big challenge for the design of the hot side heat exchanger in terms of optimizing the electrical output of the thermoelectric generator during an engine transient cycle.Based on experimental work and a validated thermoelectric generator dynamic model, the authors have identified a few issues that have big impact on the thermoelectric generator performance for automotive applications. Potential solutions also have been proposed and discussed in this paper. They include module level optimization, heat exchanger design optimization in terms of fin thermal resistance for a transient cycle, assembly and interface optimization aims for compact size and minimized contact thermal resistance, optimization of the number of modules for total maximum power output etc.