Peloton Interactive said on Tuesday that it would cease in-house production of its bikes and treadmills and move manufacturing to partners to simplify its operations and reduce costs.
The New York-based company will expand its relationship with Taiwanese manufacturer Rexon Industrial Corp., which will become the primary hardware manufacturer for its bike and tread product lines.
Peloton said it would also suspend operations at its Taiwanese-based Tonic Fitness Technology, Inc. facility through 2022. Peloton acquired Tonic in October 2019.
Peloton Chief Supply Chain Officer Andy Rendich said, “We are thrilled to expand our partnership with Rexon, a leading Taiwanese manufacturer with over 50 years of experience. Rexon has been with Peloton for many years and is a proven partner for our global operations. We plan to maintain a significant corporate and manufacturing presence in Taiwan with over 100 Peloton Taiwanese team members who continue to play a key role in our engineering and manufacturing strategy.”
Peloton CEO Barry McCarthy said, “Today we take another significant step in simplifying our supply chain and variablizing our cost structure, a key priority for us. We believe this and other initiatives will enable us to continue reducing the cash burden on the business and increase our flexibility. Partnering with market-leading third-party suppliers, Peloton will be able to focus on what we do best—–using technology and content to help our seven million members become the best versions of themselves.”
Once a pandemic darling, Peloton has seen its fortunes plummet following easing COVID-related restrictions and soaring costs that have led to bloated inventories and subscription cancellations. Earlier this year, Peloton replaced its CEO under pressure from an activist investor and unveiled measures, including price cuts, subscription plans and layoffs.
In May 2022, McCarthy warned the company was “thinly capitalized” and that unsold inventory, coupled with mounting costs, pushed the company into a quarterly loss.