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This paper reports on an investigation into the potential for a thermoelectric generator (TEG) to improve the fuel economy of a mild hybrid vehicle. A simulation model of a parallel hybrid vehicle equipped with a TEG in the exhaust system is presented. This model is made up by three sub-models: a parallel hybrid vehicle model, an exhaust model and a TEG model. The model is based on a quasi-static approach, which runs a fast and simple estimation of the fuel consumption and CO2 emissions. The model is validated against both experimental and published data. Using this model, the annual fuel saving, CO2 reduction and net present value (NPV) of the TEG’s life time fuel saving are all investigated. The model is also used as a flexible tool for analysis of the sensitivity of vehicle fuel consumption to the TEG design parameters. The analysis results give an effective basis for optimization of the TEG design.