With the upcoming regulations for fuel economy and emissions, there is a significant interest among vehicle OEMs and fleet managers in developing computational methodologies to help understand the influence and interactions of various key parameters on Fuel Economy and carbon-di-oxide emissions. The analysis of the vehicle as a complete system enables designers to understand the local and global effects of various technologies that can be employed for fuel economy and emission improvement. In addition, there is a particular interest in not only quantifying the benefit over standard duty-cycles but also for real world driving conditions.Present study investigates impact of exhaust heat recovery system (EHRS) on a typical 1.2L naturally aspirated gasoline engine passenger car representative of the India market. CSEG has developed a forward calculating Simulink model of the passenger car in order to calculate the engine loading, engine heat rejection and the exhaust energy being generated. Calibrated model was used to simulate Modified Indian Drive cycle (MIDC) drive cycle, and closely integrated with a transient underhood thermal model to evaluate the warm-up impact and the engine friction reduction due to the EHRS system.The approach can assist in the selection of appropriate powertrain to optimize fuel economy. Further, the tool and the methodology quantifies benefits in real world driving conditions and can help designers make educated investment decisions by determining, in advance, the cost/benefit and emission impact of the technologies.