The effectiveness of passive cooling by phase change materials (PCM) is compared with that of active (forced air) cooling. Numerical simulations were performed at different discharge rates, operating temperatures and ambient temperatures of a compact Li-ion battery pack suitable for plug-in hybrid electric vehicle (PHEV) propulsion. The results were also compared with experimental results. The PCM cooling mode uses a micro-composite graphite–PCM matrix surrounding the array of cells, while the active cooling mode uses air blown through the gaps between the cells in the same array. The results show that at stressful conditions, i.e. at high discharge rates and at high operating or ambient temperatures (for example 40–45°C), air-cooling is not a proper thermal management system to keep the temperature of the cell in the desirable operating range without expending significant fan power. On the other hand, the passive cooling system is able to meet the operating range requirements under these same stressful conditions without the need for additional fan power.