Aiming to increase the vehicle performance, a method for real time monitoring of critical drive components is presented. Using the example of an interior permanent magnet machine, with gearbox attached, on the rear axle for a hybrid electric vehicle, a lumped parameter thermal model is introduced. Based on this analytic model, which is verified using measurements, a reduced model capable of real time monitoring of the magnet and stator winding temperatures is presented. The influence of the gearbox integration and of additional heat sources on the accuracy of the full and of the reduced modeling approaches is discussed.