The objective of this paper is the development of the forward-looking dynamic simulation model of a hybrid electric vehicle(HEV) for a fuel economy study. The specification of the vehicle is determined based on two factors, engine peak power to curb weight ratio and specific engine power. The steady state efficiency models of the powertrain components are explained in detail. These include a spark ignition direct injection(SIDI) engine, an integrated starter alternator(ISA), and an infinitely variable transmission(IVT). The paper describes the integration of these models into a forward facing dynamic simulation diagram using the AMESim environment. Appropriate vehicle and driver models have been added and described. The controller was designed in Simulink and was combined with the physical powertrain model by the co-simulation interface. Finally, the simulation results of the HEV are compared with those of a baseline vehicle in order to demonstrate the fuel economy potential. Results for the vehicle speed error and the fuel economy over standard driving cycles are illustrated.