Nowadays, in many applications, the Permanent Magnet Synchronous Motor (PMSM) has become an alternative to induction machines due to its reliability and excellent dynamic performance. Therefore, the PMSM are being used in the large variety of applications, especially in automotive or high power traction systems. In this motor, the diagnosis of magnetic status has become a challenging task for many researchers since a decade. Therefore, in this research paper an attempt has been made to solve the above problem and trying to diagnose magnetic demagnetization in the early stage precisely. The magnetic demagnetization of the PMSM has been diagnosed with the help of a proposed simulation model. In the simulation model, various stages of magnetic demagnetizations have been created by varying some physical parameters and have been diagnosed in the early stages by applying advanced wavelet transform technique. For diagnosis of magnetic demagnetization, two approaches have been used; first is the time domain technique and second is the time-frequency domain technique.