NOVELTY - The system has an electric machine i.e. generator (12), coupled to an internal combustion engine (20) and an inverter (22), and a transmission (14A) coupled between the engine and the electric machine. Transmission speed ratio is set such that speed of the generator is regulated independent of engine speed. Another electric machine i.e. motor (24), is coupled to another inverter and a wheel axle. A high voltage battery (16) is coupled to the two inverters. A switch box (21) enables direct alternating current (AC)/AC connection from the generator to the motor.    USE - System for electric power management of a vehicle e.g. front, rear or all wheel drive vehicles such as plug-in hybrid electric vehicle and hybrid electric vehicle. Can also be used for a passenger vehicle, a truck and an off-road equipment.    ADVANTAGE - The operating efficiency of the electric machine is improved, thus reducing size of the engine and the electric machine and reducing fuel consumption of the vehicle. The series drive efficiency of the vehicle is improved by reducing the alternating current-direct current energy conversion losses when the engine is operated. The unique power split arrangement of the transmission from 4-N gears implements a 2 speed low loss transmission for an electric traction system and decouples the engine gears, so that downsizing of the engine is feasible with a 10-20 percentages reduction in power requirements. The vehicle is operated through electrical connection from the generator to the motor, thus reducing load on the inverters of the vehicle, and hence reducing inverter size and hardware costs of the vehicle and increasing overall system efficiency. The vehicle has a reduced power electronics duty cycle so as to improve reliability, and increased number of limp home modes.    DETAILED DESCRIPTION - An INDEPENDENT CLAIM is also included for a method for operating a hybrid vehicle.    DESCRIPTION OF DRAWING(S) - The drawing shows a schematic block diagram of a system for directly connecting electrical machines of a vehicle.    Generator (12)    Transmission (14A)    High-voltage battery (16)    Internal combustion engine (20)    Switch box (21)    Inverters (22)    Motor (24)