The future of the Hybrid Electric Vehicle and Fuel Cell Electric Vehicle is very promising for the automotive industry. In order to take a full advantage of those vehicles, a better thermal performance of the electric motor is required. A series of CFD analyses were performed in this study for the design of a liquid-cooled PM electric motor. Based on the results of this study, the thermal contact resistance of thermal interface between stator & housing is critical for the design of this PM electric motor. The effect of thermal conductivity of slot filling epoxy & stator core lamination on the peak temperature of stator winding is small. Improving the heat transfer capability of the air gap between stator & rotor can reduce the peak rotor temperature. The cooling of rotor magnet at the higher rotor speed is essential since the rotor temperature increases significantly due to higher power loss at rotor.