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May 25, 2021

Peloton to build first US factory in response to pandemic boom

By MarketLine

Fitness firm Peloton is constructing its first US factory, which will help it keep up with surging demand for its high-tech exercise equipment.

The new factory, located in Troy Township Ohio, will receive an investment of around $400m and will produce its bikes and treadmills. The company hopes that the domestic factory will help bring prices down, but CEO John Foley has admitted this could take a few years to materialize.

The investment comes in response to the surge in demand for Peloton products, which has been driven by the ongoing coronavirus pandemic, as people have become increasingly conscious of their health and general wellbeing.

Despite its recent success, the company has faced issues such as long delivery delays and increasing scrutiny about the safety of its machines, which have caused both injury and death.

Peloton announcement follows an impressive year for the brand

Peloton’s 200-acre site in Ohio will include more than 1 million square feet of manufacturing, office and amenities space, according to the company. The factory will bring 2,000 jobs to the area and is expected to be up and running by 2023.

The announcement comes following a stellar year for the fitness brand, which has been a major beneficiary of the pandemic. Peloton has grown to become a household name amid the pandemic era and has attracted a loyal fan base of 4.4 million members through its range of tech-infused stationary bikes and treadmills. It also has an impressive market cap of around $30bn.

Lockdowns have seen consumers seek new activities and sports to maintain fitness levels, which has led to behavioural shifts in the choice of workouts.

US factory will help improve supply chain

At present, Peloton manufacturers its products in third party facilities in the Asia-Pacific region (mainly in Taiwan) despite most of its customers being in the US. While this has helped keep manufacturing costs down, it has also led to long shipping delays, caused by both heightened demand and logistical issues brought about by the COVID-19 pandemic.

However, recently on 1 April, 2021, Peloton acquired Precor, one of the largest global commercial fitness equipment providers with a significant US manufacturing presence. With this acquisition, Peloton can establish a US manufacturing capacity, boost research and development capabilities and accelerate its penetration of the commercial market. It plans to produce connected fitness products in the US before the end of the calendar year 2021.

Peloton’s success has been tainted by safety issues

On May 5, 2021 Peloton recalled treadmills in the US and UK over a series of safety issues following investigations by a US watchdog. In the US, 125,000 Tread and Tread+ machines currently being recalled following the death of a six-year-old child. In addition to the death, there have been about 72 reports of adult users, children, pets and objects being pulled under the rear of the treadmill.

Peloton’s stock has fallen 34% in 2021 due to both problems with safety and shipping delays, as a result tackling these issues must be the company’s top priority moving forward if it wishes to continue the success it experienced in 2020.