Thermoelectric generators (TEGs) can be used for a variety of applications in automobiles. There is a lot of interest in using them for waste heat recovery from a fuel economy point of view. This paper examines the potential of TEGs to provide cost-effective improvements in the fuel economy of conventional vehicles and hybrid electric vehicles (HEVs). Simulation analysis is used to quantify fuel economy benefits. The paper explains how a TEG is used in a vehicle and explores the idea of improving the TEG design by introducing a thermal reservoir in the TEG model to improve the waste heat recovery. An effort is made to identify the technological and economic barriers (and their thresholds) that could prevent TEGs from becoming an acceptable means of waste heat recovery in automobiles.