The global economy strives towards clean energy in the phase of climate change and the automotive industry is researching in improving the efficiency of automobiles. In respect to that, direct injection types of diesel engines are becoming popular. However, improving the performance and reducing the CO₂ emission of a vehicle is necessary in order to meet the fuel economy targets.A turbocharged common rail direct injection diesel engine is selected for investigation purpose to study its performance and average fuel consumption values over typical driving cycles (UDC, EUDC and BS IV). Experimental work is carried out to collect the vehicle performance and fuel economy test data.The simulation tools are used to speed up the product development process and to bring the new products into the market. The AVL Cruise simulation technique allows us to speed up the optimization of vehicle and powertrain parameters in an early stage of the product development process. The simulation model is used for parametric studies of the vehicle. Many design iterations are performed in order to reduce the product development time.One-dimensional simulation modeling is made and analyzed using AVL Cruise for a manual front-wheel-drive vehicle. Detailed comparisons with experimental results were analyzed. The result shows that the fuel economy of a vehicle is a function of vehicle mass, aerodynamic drag and engine efficiency. The same model was further used to predict the performance and fuel economy for new vehicle development program by optimizing the vehicle and powertrain parameters through simulation.