Peloton Interactive said on Tuesday it will cease in-house production of its bikes and treadmills and move manufacturing to partners in an effort to simplify its operations and reduce costs. The New York company will expand its relationship with Taiwanese manufacturer Rexon Industrial Corp., which will become the primary maker of hardware for its bike and tread product lines.
Peloton will also be suspending operations at its Taiwan-based Tonic Fitness Technology, Inc. facility through the remainder of 2022. The company acquired Tonic in October 2019.
Peloton Chief Supply Chain Officer Andy Rendich said, “We are thrilled to be expanding 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 Taiwan 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 that this along with 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 7 million members become the best versions of themselves.”
Rexon CEO Rex Wang said, “We are thrilled to be expanding our relationship with Peloton as the Company reaffirms its commitment to Taiwan. For years, Rexon has worked side by side with Peloton to produce the hardware behind its iconic and industry-leading products. We are grateful for the opportunity to play an even greater role in the Company’s manufacturing and look forward to continued collaboration in the future.”
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 planned measures including price cuts, subscription plans and large layoffs.
McCarthy warned in May the company was “thinly capitalized” and that unsold inventory coupled with mounting costs pushed the company into a big quarterly loss.