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In this study, we have investigated the recovery of energy lost as waste heat from exhaust gas and engine coolant, using an improved thermoelectric generator (TEG) in a LPG fueled SI engine. For this purpose, we have designed and manufactured a 5-layer heat exchanger from aluminum sheet. Electrical energy generated by the TEG was then used to produce hydrogen in a PEM water electrolyzer. The experiment was conducted at a stoichiometric mixture ratio, 1/2 throttle position and six different engine speeds at 1800-4000 rpm. The results of this study show that the configuration of 5-layer counterflow produce a higher TEG output power than 5-layer parallel flow and 3-layer counterflow. The TEG produced a maximum power of 63.18 W when used in a 5-layer counter flow configuration. This resulted in an improved engine performance, reduced exhaust emission as well as an increased engine speed when LPG fueled SI engine is enriched with hydrogen produced by the PEM electrolyser supported by TEG. Also, the need to use an extra evaporator for the LPG fueled SI engine is eliminated as LPG heat exchangers are added to the fuel line. It can be concluded that an improved exhaust recovery system for automobiles can be developed by incorporating a PEM electrolyser, however at the expense of increasing costs.