This paper investigates the existing efficiency formulations of a thermoelectric generator (TEG) and compares them with overall efficiency formulation (ηoverall). As TEG efficiency is the key factor in TEG performance, ηoverall formulation is validated and compared to the maximum efficiency (ηmax) formulation with consideration of temperature independent figure of merit (ZT). We have found that the (ηmax - ηoverall) is minimum (1.5%) at low temperature difference (100 K) and it increases (up to 12.67%) when temperature difference increases (up to 800 K). ηoverall is close to ηmax at low temperature difference but when temperature difference increases, ηoverall shows the overestimation of the efficiency results. Compatibility factor is the crucial factor for effective hybridization and segmentation of thermoelectric materials. Thermoelectric materials of Half-heusler alloys of Hf0.75Zr0.25Ni0.9Pd0.1Sn0.975Sb0.025 and FeV1.2−xTixSb (x = 0.4) are considered for the p-n couple and TEG module design. The exhaust thermoelectric generator (ETEG) system consisting of 56 TEG modules is proposed to recover the automobile exhaust waste heat. Output power of 51.52 W is obtained from the ETEG system at a temperature difference of 458 K. At a temperature difference of 800 K (when cold end temperature is fixed at 315 K and hot end temperature vary up to 1115 K), the ETEG system can achieve 75.8 W of power. This ETEG system also provides an additional advantage in the life increment of the muffler due to a reduction in peak temperature. The overall efficiency of the proposed ETEG system is found to be 7.81 %.