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Engineering wise ICE engines really are hitting their limits. There is only so much you can squeeze out of an interrupted combustion before reliability starts to suffer.

Getting more power out of ICE is easy, getting more efficiency is not easy at all. The current alley of improvement seems to be increasing the compression ratio, the higher the ratio the higher the efficiency. The limitation here seems to be the piston getting too hot and melting. It is the only component in the engine that can not be cooled sufficiently. Heat pipes inside the piston might help but haven't been tried afaik.