This paper shows a preliminary study about the output voltage modulation of a modular battery system based on a seven-level cascaded H-bridge inverter used for vehicle propulsion. Two generally known modulation techniques, pulse width modulation (PWM) and fundamental selective harmonic elimination (FSHE), are extensively compared for such an innovative modular battery system inverter considering EVs’ broad torque-speed range. The inverter and the battery losses, as well as the inverter-induced current THD, are modeled and quantified using simulations. At low speeds, if the modulation index M is below 0.3, FSHE induces a high current THD (>>5%) and, thus, cannot be used. At medium speeds, FSHE reduces the drivetrain losses (including the battery losses), while operating at higher speeds, it even reduces the current THD. Thus, an individual boundary between multilevel PWM and FSHE can be determined using weightings for efficiency and current quality. Based on this, a simple hybrid modulation technique is suggested for modular battery system inverters, improving the simulated drive cycle efficiency by a maximum of 0.29% to 0.42% for a modeled small passenger vehicle. Furthermore, FSHE’s high speed dominance is demonstrated using a simple experimental setup with an inductive load.