What they need to do is completely divorce the power generation from the drive as a diesel electric train does. Add in some batteries in the middle and you could then tune the diesel engine for maximum efficiency in a narrow rpm range and run a 1.2l or perhaps 1.4l for larger cars 3 cylinder engine to generate electric, with the batteries taking the slack when more power is required and at startup, and the engine charging the batteries when all it's power is not required.