Energy conservation and emissions reduction have become increasingly significant for automobiles due to the severity of the current energy situation. Hybrid electric vehicle (HEV) technology is one of the most promising solutions. This study investigated the total efficiency of a HEV powertrain. To improve the total efficiency, the engine should be regulated to work at its highest efficiency and drive the wheels directly as much as possible. To accomplish this, we developed an energy management strategy based on the direct drive area (DDA) of the engine’s efficiency map. Several typical HEV models were built to compare the fuel consumption using DDA and rule-based strategies. Furthermore, the function of the HEV transmission system with DDA was considered. The transmission in a HEV should regulate the engine to work at its highest efficiency as much as possible, which is rather different than the regulation in an internal combustion engine vehicle. The functional change may lead to transmission systems with fewer gears but optimal gear ratios. If this trend is realized, the manufacturing cost of HEVs could be largely reduced.