The reaction wheel is a typical actuator and a crucial weak link in the spacecraft attitude control system, and much attention has been paid to its reliability problem. Due to limited samples and high cost for reaction wheel life tests, a simulation method by introducing attitude coupling dynamics and multiplicative fault concept is developed to analyze the logic of electric current as a performance indicator and verify its accuracy for reliability modeling. Furthermore, a new and intrinsic performance indicator of multiplicative fault is proposed for more application scenarios of reliability modeling and an adaptive sliding mode observer is designed for fault estimation. An illustrative example shows that the performance indicator of multiplicative fault can be used for various mission scenarios but requires certain persistent excitation, while electric current is the opposite.