There are ambitious greenhouse gas emission (GHG) targets for the manufacturers of light duty vehicles. To reduce the GHG emissions, plug-in hybrid electric vehicle (PHEV) and extended range electric vehicle (EREV) are promising powertrain technologies. However, the battery is still a very critical component due to the high production cost and heavy weight. This paper introduces a holistic approach for the optimization of the battery size of PHEVs and EREVs under German market conditions. The assessment focuses on the heterogeneity across drivers, by analyzing the impact of different driving profiles on the optimal battery setup from total cost of ownership (TCO) perspective. The results show that the battery size has a significant effect on the TCO. For an average German driver (15,000 km/a), battery capacities of 4 kWh (PHEV) and 6 kWh (EREV) would be cost optimal by 2020. However, these values vary strongly with the driving profile of the user. Moreover, the optimal battery size is also affected by external factors, e.g. electricity and fuel prices or battery production cost. Therefore, car manufacturers should develop a modular design for their batteries, which allows adapting the storage capacity to meet the individual customer requirements instead of "one size fits all". (C) 2014 Elsevier Ltd. All rights reserved.