They're far more efficient than a combustion engine, but electric motors and associated controllers/inverters do generate heat, and lots of it. DIY electric car conversion hobbyists struggle with this big time, for example. Cooling loops w/ pumps, fans etc. It's not as bad as the battery pack, but still a thing to design around.

I get the impression there's room for improvement esp in the inverter space.

Cars of course being only application of electric motors. I'm no electrical engineer, but I gotta think stuff like generators must have challenges?