Abstract: Cost estimation model and cost reduction model of product are compared, their application purpose is different, and cost reduction model demands a deeper insight into the way of presenting product information than cost estimation model. Hierarchical structure of product cost model which integrates product structure tree, cost structure and product design process is proposed, where the parameters affecting the cost estimation of each part and assembly are embedded into the product structure tree to facilitate the cost control in design process. A case study of oil damper ZUMD-02V shows the effectiveness of the new approach.