This paper provides a methodology and identifies opportunities for battery pack downsizing in a hybrid electric vehicle (HEV). A new term of power denial and a new metric of lost energy opportunities are introduced and analyzed in addition to utilization, temperature, life, and cost. A model-based power limiting algorithm is used in computing real-time power capability of the battery. The downsized pack with a shifted SOC window is evaluated in a light-duty HEV. A parameterized electro-thermal model is used to capture voltage, state-of-charge, and temperature. A semi-empirical ageing model is integrated to predict the capacity loss and resistance increase of the downsized pack. The battery ageing model is developed based on a set of experiments carefully designed to clarify the influence of operating SOC on battery degradation. The parametric study shows that the number of cells in the pack could be reduced from 76 to 64 while shifting nominal operating SOC from 50% to 35% without changing the pack energy throughput. This would result in a 19% increase in energy utilization per cell, a 0.5% increase in capacity fade and a 2.9% increase in internal resistance, while the pack cost will be reduced by 10%.