I'll answer a little differently in an attempt to seem high priced and somewhat selective. The single phase input works via a single phase input rectifier section to provide power to the DC bus. The 3 phase output works via a 3 phase inverter section with suitable drives. You're stuck with the horsepower loss because you will never achieve anywhere near 100% conversion efficiency. If you could the VFD would be very small and require no heat sinking. If you meant deliberately limiting the load's horsepower through the VFD's programming, that is fairly common these days. I'll ask around next time I'm over at the dollar store pickin' up chicks.
Joe
