Peloton abandoned its own bike factories three years in — all output went to a partner

In July 2022 Peloton said it would stop building bikes and treadmills at its own factories and rely solely on partners, ceasing operation of the Tonic Fitness Technology facilities it had acquired in 2019 and moving all production to longtime Taiwan partner Rexon Industrial. Chief supply chain officer Andrew Rendich described it as going back to nothing but partnered manufacturing, letting the company ramp up and down with demand.

The reversal unwound a three-year dual supply chain: Peloton had built part of its standard Bike and the higher-end Bike+ in-house while also using Rexon, kept Quanta Computer for touch-screen manufacturing, and added Pegatron, another major Apple supply chain partner, to build its upcoming rowing machine. Rendich said running an internal and an external operation required duplicate resources, and that combining them into one team was necessary to drive down costs and improve product quality.

The retreat followed months of turmoil: co-founder John Foley was replaced as CEO by Barry McCarthy in February 2022, the company cut nearly 3,000 employees including many executives, and the stock was down about 75% for the year after Peloton incorrectly predicted its business would weather gym reopenings and was left with a glut of equipment. It had already cancelled a plan to build its equipment in Ohio.

About 570 Taiwan factory jobs cut, 100 retained as partner liaisons; closure cost undisclosed, and the Ohio plant plan had already been cancelled.

Peloton had bet on owned capacity for pandemic-era demand, then watched that demand fall off as gyms and economies reopened — the factories outlived the boom.

Running two supply chains at once required duplicate operations teams and resources a shrunken company could no longer afford.

Partner manufacturing lets output scale with real demand, which the company framed as the fastest route to lower costs and better quality.

Owning factories is a bet on demand you don't control: partners flex with the cycle, plants you own become cost you can't turn off.

Peloton retained about 100 existing staffers in Taiwan to work with its outside partners and declined to disclose the cost of shutting down its own operations. The rowing machine stayed on track for release in 2022, with Quanta keeping the touch-screen work and Pegatron joining for the new product.