Peloton to outsource and suspend production

Peloton will stop making its own interactive stationary bikes and treadmills, outsourcing those duties to a Taiwanese manufacturer as it attempts to revive sales that surged during the pandemic.

The New York City company, which recorded its only profitable quarters during the pandemic, is seeking to lower costs after sales slid when gyms began to reopen and cheaper knockoffs entered the market.

It will suspend manufacturing operations at the Tonic Fitness Technology plant in Taiwan for the rest of the year.

Peloton’s strategy was to bring manufacturing in-house, believing that if sales remained robust it would reduce costs and avoid shipping complications. Sales growth doubled in 2020 and it ramped up production.

However, after three consecutive profitable quarters in 2020, at the height of the pandemic, it began to lose money in the first quarter of 2021 and has continued to do so.

Other manufacturers, seeing Peloton’s success, stepped in to build cheaper interactive bikes and treadmills, leaving Peloton with a growing inventory of unsold equipment.

In February the company announced a major restructuring and abandoned plans to open its first U.S. factory in Ohio, which would have employed 2,000 workers. Co-founder John Foley stepped down as CEO and the company announced nearly 3,000 job cuts.

The company reported mounting losses and stagnating sales in its most recent quarter. It also offered a bleak sales outlook for the current quarter and signed a commitment to borrow hundreds of millions of dollars.