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This paper analyzes and compensates unavoidable time delay effects in a hardware-in-the-loop (HIL) simulation for automotive permanent magnet synchronous motordrive systems. The amount of time delay between a digital controller and HIL simulator is investigated. The effects of the time delay are analyzed by use of s-domain representation of the entire closed-loop system. In addition, a stability study has been carried out using a root locus. The analysis results show that the time delay strongly affects the accuracy and stability of the HIL simulation according to increment of the motor angular speed. For an accurate HIL simulation, a compensation of the time delays is applied and verified through comparison with offline simulation results.