Interior permanent magnet synchronous motor (IPMSM) has been widely used in hybrid electric vehicles (HEVs) since the high power density and efficiency. However, the primary drawback of IPMSM is the demagnetization phenomenon caused by the permanent magnets. Modeling of the demagnetization fault are important in developing and designing a protection system for the traction on HEVs, thus, an efficient and accurate IPMSM model for demagnetization fault simulation is necessary. By using the conventional dq0 IPMSM model, the current indicators of demagnetization fault are affected by noise which will cause inaccuracy of the simulation. For this reason, a dynamic phasors model of IPMSM is presented in this thesis. In this thesis, firstly, the dynamic phasors model of IPMSM is verified by using small-signal transient analysis for its stability. Secondly, the time-domain transient simulations of positive sequence currents are shown and compared to the conventional dq0 model with demagnetization fault.