What Are Non-Recurring Engineering (NRE) Costs in Manufacturing?

Many product developers underestimate the real costs of bringing a product to market. It’s easy to focus on the patent or the prototype and overlook the engineering and manufacturing setup required to actually produce the product at scale.

When preparing a new product for mass production, there’s a lot more involved than just ordering parts and assembling them. Before anything can roll off the production line, there’s often significant upfront work that needs to happen, and that’s where Non-Recurring Engineering (NRE) costs come in. NRE costs refer to the one-time engineering expenses required to design, test, and set up the processes for manufacturing a product. These costs are a critical part of the production journey, especially for companies bringing a new design to life or customizing an existing product.

Understanding NRE is essential for any brand working with a contract manufacturer or any type of supplier. Whether you’re building a custom plastic housing, a PCB, or developing new testing fixtures, NRE costs help you to build a product that can be repeated with the same output and quality.  In this blog, we’ll break down what NRE costs are, where they show up during production, why they matter, and how to manage them effectively.

What Are NRE Costs?

NRE costs are one-time engineering and development expenses required to get your product ready for mass production. These are not part of your per-unit cost but instead, they cover the initial work needed to set up manufacturing processes, build tools, create prototypes, and validate the design before full-scale production begins.

For example, if you're creating a custom plastic housing, the cost to design and build the injection mold is an NRE cost. If your product includes a custom circuit board, the PCB layout, test fixture development, and early prototyping are also part of NRE. These costs are essential to ensure your product can be manufactured consistently and at scale.

NRE costs are the investment needed to turn your design into a manufacturable product. They’re a critical part of the transition from development to production, especially when working with a contract manufacturer who needs to build reliable tooling, fixtures, and processes specific to your design.

Common Examples of NRE Costs

NRE costs can take many forms depending on the complexity of your product, the materials involved, and the level of customization required. Below are some of the most common types of NRE costs you'll encounter when moving from prototype to production, each playing a key role in making your product manufacturable at scale.

Tooling and Mold Fabrication

One of the most common and expensive NRE costs is the creation of custom tooling, particularly for plastic injection molding or die casting. These tools must be engineered to exact tolerances to ensure that every part produced meets design specifications.

These tools can cost anywhere from a few thousand dollars to tens of thousands, depending on the number of cavities, material choice, and complexity. These costs are incurred once but it is also the reason why you can mass produce with tight tolerances and high repeatability.

Custom Fixture or Jig Design 

Fixtures and Jigs are another common NRE cost that directly supports the assembly and quality control process. For example, your contract manufacturer might design a custom fixture to hold a PCB in place during soldering, or a jig to align components during final assembly. Without these tools, manual processes would be inconsistent and error-prone. While these fixtures might not be as expensive as tooling, they’re often just as important for maintaining efficiency and product quality in production.

PCB Layout and Prototyping

If your product includes a custom circuit board, an engineer needs to create the layout based on your schematic, apply design-for-manufacturing (DFM) best practices, and generate all the necessary files for fabrication. In most cases, several prototype boards will be produced before committing to a final version. These early builds help identify issues in design, layout, or component selection, and are critical for de-risking production.

Mechanical Design Optimization

Many prototype designs need to be adjusted before they’re ready for production. This could include designing parts to be optimized for tooling, adding draft angles, refining tolerances, or creating 2D drawings. This engineering work is typically done once and helps to create repeatability during the production process. 

Product Certification and Compliance Testing

Depending on your product and target markets, you may need certifications like FCC, CE, UL, or environmental standards like RoHS or REACH. Some of these require third-party testing labs and formal documentation. In many cases, companies perform pre-compliance testing first to reduce the risk of failure later. All of this falls under the category of NRE, because it’s done once for legal and commercial access to your markets.

Each of these examples represents a different aspect of NRE, but they all serve the same purpose: preparing your product and your manufacturer for successful production. Without investing in these upfront efforts, you run the risk of quality issues, missed deadlines, or production delays later on.

Who Typically Pays for NRE Costs?

In most cases, the customer pays for the NRE costs upfront. This is because these expenses are tied to custom work, tooling, fixtures, engineering, testing, and certifications that are specific to that customer’s product and have no value to other projects for the supplier. For example, a mold made for your custom plastic part can’t be reused for a different design, and a test fixture tailored to your PCB layout serves no purpose for another brand. Since these items are effectively owned by the customer (even if they remain at the factory), it’s standard for the brand to cover the cost.

However, there are variations depending on the commercial arrangement. In some partnerships, particularly when volumes are very high or the relationship is long-term, the contract manufacturer may choose to absorb some or all of the NRE costs as an investment in future business. In those cases, the manufacturer is betting on making the money back over time through production volume. This arrangement is less common for lower-volume or unproven projects because it increases the manufacturer’s risk.

No matter the arrangement, it’s critical to clarify NRE responsibilities during the quotation and contract negotiation process. This includes understanding what the NRE cost covers, whether the customer owns the tooling, what happens if there are design changes, and how future engineering support is billed. 

At the end of the day, NRE is an investment. Whether paid upfront or rolled into future orders, these costs enable a smoother path to production and ensure that the right infrastructure is in place to support quality, efficiency, and scalability.

Conclusion: What are NRE Costs?

NRE costs are an essential part of bringing any new product to market. While they’re often overlooked early in the process, these one-time investments lay the groundwork for scalable, repeatable, and high-quality production. NRE costs enable your manufacturer to build your product the right way and consistently thousands of times.

At EPower Corp, we work closely with customers to guide them through this process. Our team identifies NRE costs upfront, supports you through each phase of engineering and validation, and ensures that your product is ready for successful mass production. If you’re planning a new product launch or transitioning to mass production or just need a second opinion, then please feel free to reach out.