In modern automotive technology, the majority of energy produced by internal combustion engines is lost as waste heat, primarily through heat dissipation from exhaust gasses. This inefficiency has significant implications for fuel consumption and environmental impact, especially in an era of increasing energy demand and concerns about pollution. Thermoelectric generators (TEGs) offer a promising solution by converting waste heat directly into electrical energy, thereby improving fuel efficiency and reducing emissions with the benefit of not introducing moving parts or complex systems. First, this paper provides a comprehensive review of TEGs in automotive waste heat recovery, exploring their underlying principles, material advancements, and most optimal conditions for the best power output and efficiency. Next, key design challenges are addressed, including heat exchanger optimization, thermoelectric material efficiency, leg geometry, and system integration, all to determine the method in which TEGs can be used to convert the most possible heat to electric power as efficiently as possible. Finally, the paper discusses potential enhancements, research gaps, and future directions in TEG development.