Abstract: The performance degradation analysis is an effective way of assessing the reliability when there are not enough failure data available. The performance degradation process of mechanical systems is described as a linear degradation process. With consideration of the extreme impact and the operation impact on the products, the threshold effect of the performance degradation process on the sudden failure is analyzed. Based on the analysis of the performance degradation process and the impact process of variable failure thresholds, a competitive failure reliability model is established with consideration of both the sudden failure and the performance degradation failure. The reliability model is analyzed with an example. It is shown that the reliability of the product would be overestimated if the failure threshold is regarded as a definite value. In a certain range, the reliability of the mechanical products gradually decreases with the increase of the change rate of the failure threshold, and keeps a positive correlation with the performance degradation.