Further fuel efficiency improvements are mandatory in order to achieve the CO2 emission limits envisaged in the future. Electrification of the powertrain is seen as one of the key technologies to achieve these future goals. However, electrification of the power train typically goes with a massive cost increase of the overall system itself which is especially crucial for cost sensitive markets like India.AVL's approach to cost reduction for comparable performance and fuel consumption target values is an integration of functions. This paper demonstrates that, through a deeper interaction of the single powertrain components, further fuel efficiency optimization may be gained. System optimization at a powertrain level enables the achievement of future powertrain targets with respect to fuel efficiency and performance with only minimal and reduced requirements at a component level (i.e. combustion engine, electric drive, transmission and battery). Consequently this leads to a powertrain configuration with a small two-cylinder combustion engine, a two and four speed, respectively, transmission and a moderate electric drive which fulfills typical requirements in the A to C-class segment. This configuration enables a significant cost reduction on powertrain level in comparison to today's hybrid powertrains, which typically combine existing components of conventional powertrains with an electric drive.Hence the key for the hybrid powertrain solutions for the Indian market is the following: reduction of complexity on the component level and optimization of the functional interaction between all components at powertrain level.