Peloton has announced that it will exit all owned manufacturing operations, cease making its own products and instead expand its partnership with Taiwan-based manufacturer Rexon.
CEO Barry McCarthy – a former Netflix executive who became CEO in February this year – said that the move will help to simplify Peloton’s supply chain and optimise cost structure.
“We believe that this, along with other initiatives, will enable us to continue reducing the cash burden on the business and increase our flexibility,” explained McCarthy. “Partnering with 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.”
This will make Rexon the primary manufacturer of Peloton’s bike and treadmill products and, as a result, Peloton will also mothball Tonic Fitness Technology, which the company acquired in 2019 for US$47.4m.
Rex Wang, CEO of Rexon, said: "Were 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.”
Peloton has struggled to maintain the momentum of sales that it gained during the COVID-19 lockdowns. In 2021 shares and gross profit dropped and the company estimated that tactical changes within the company would affect profits until 2023. In January 2022, the company temporarily halted bike and treadmill production. Shortly after, Peloton announced it was aiming to cut around US$800 in costs and reduce capital expenditure by US$150m.
Peleton did not mention how this latest operational change with Rexon would impact the company’s Peloton Commercial [Precor] business, which it acquired in April 2021 for US$420m.
Peloton’s chief supply chain officer Andy Rendich said: “Rexon is a proven partner for our global operations. We plan to maintain a significant corporate and manufacturing presence in Taiwan with over one hundred Peloton Taiwan team members who continue to play a key role in our engineering and manufacturing strategy.”
