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Reflecting on the world's trend on saving crude oil consumption and to create an economical fuel efficient vehicle for the increasing world population, a new THS-II HV powertrain has been developed for the compact vehicle class. The application of a THS type powertrain for the compact vehicle class was a first for the world and to achieve it, brand new hardware, and software needed to be developed. For the Internal Combustion Engine (ICE), state of the art technologies such as the use of the Atkinson cycle with Variable Valve Timing (VVT), cooled exhaust gas recirculation (EGR), an electric water pump, a compact exhaust manifold, a Low Friction chain, beltless system and exhaust heat recovery system were applied. For the electric motor, copper wire with a rectangular cross section and divided stator cores combined with a newly developed production process were applied for higher volumetric density.