Although the technology of combustion engines is reasonably well developed, the degree of efficiency is considerably low. Considerable amount of the energy of around 35 % is lost as exhaust waste heat, and up to 30 % is dissipated in the cooling circuits. Due to this, thermal recuperation has a great potential for raising the efficiency of combustion engines. In order to meet the ever-increasing consumer demand for higher fuel economy, and to conform to more stringent governmental regulations, auto manufacturers have increasingly looked at thermoelectric materials as a potential method to recover some of that waste heat and improve the overall efficiency of their vehicle fleets. Seeking new possibilities to make vehicles greener and more efficient, the industry wants to use the waste heat which passes through the exhaust system almost completely unused in the past. The combination of heat exchanger and thermoelectric material integrated into the vehicle environment results in high demands on design, size & dimensioning of the thermoelectric generator system. As a company specializing in the manufacture of exhaust systems for the automotive industry, Eberspächer Exhaust Systems of Americas is uniquely well-positioned to develop and integrate an in-line system for the capture and conversion of thermal energy into electrical energy, and to account for the effects of the heat exchanger on the rest of the exhaust system and engine. In this paper, the stages of the thermal and mechanical design of heat exchanger, material selection, analytical simulations of thermal, contact phenomena, finite element methodology used, physical TEG prototype fabrication and testing stages involved in the development of a 1000 Watt thermoelectric generator (TEG) for a diesel engine of a military tank are explained in detail.