Powertrain system duplication for hybrid electric vehicles and range-extenders presents serious cost challenges. Cost increase can be mitigated by reducing the number of cylinders but this usually has a negative impact on noise, vibration and harshness (NVH) of the vehicle system. This paper considers a novel form of two-stroke cycle engine offering potential for low emissions, reduced production cost and high potential vehicle efficiency. The engine uses segregated pump charging via the use of stepped pistons offering potential for low emissions. Installation as a power plant for automotive hybrid electric vehicles or as a range-extender for electric vehicles could present a low mass solution addressing the drive for vehicle fleet CO2 reduction. Operation on the two-stroke cycle enables NVH advantages over comparable four-stroke cycle units, however the durability of conventional crankcase scavenged engines can present significant challenges. The use of stepped piston charging methods to isolate the crankcase from the scavenging process provides a solution to these challenges with significantly higher durability and lower oil consumption whilst offering specific power per litre levels associated with comparable conventional two-stroke cycle engines. Stepped piston engines have been shown to operate at significantly lower oil consumption under full load operating conditions. This therefore overcomes serious drawbacks associated with conventional two-stroke cycle units. Oil consumption reduction strategies applied to crankcase scavenged engines normally result in durability problems. Design strategies are presented for compact powertrain solutions supported by initial data from computational fluid dynamic modelling using Ricardo WAVE engine simulation software. Details of the thermodynamic model development supported by experimental data are discussed together with design aspects that enable minimum NVH in a compact low mass power plant solution.