Modern automotive leather

Challenges and opportunities

99% 98%

91%

79%77%

72%69% 69%

65% 64%

0%

20%

40%

60%

80%

100%

Air conditioning

($1,100)

Power windows

(down & up)

($200)

Genuine leather

seats ($1,000)

Heated and

cooled front seats

($750)

Premium brand

audio ($750)

8-Way power

front seats ($600)

Navigation

system ($1,500)

Genuine leather

steering wheel

($200)

Bluetooth ($150) Sunroof ($900)

91% of participants made clear that they

desire genuine leather seats in their next

vehicle

Ranked 3rd out of 30 choices

(Leather Seating Study 2010, The Planning Edge Inc.)

Opportunities: Does the consumer want

leather?

80% recognize Vinyl and Polyurethane as synthetics

Imagery

– Vinyl = Inexpensive, practical, plain, simple

– Leather = High quality, attractive, comfortable, soft

91% of luxury vehicle owners with leather seats are

satisfied with seat materials compared to 62% of non-

luxury car owners

(Leather Seating Study 2010, The Planning Edge Inc.)

Opportunities: Preference for leather

China is the 2nd largest luxury market in the world behind Japan

The growth of luxury in China

The Chinese luxury market

A growing consumer market fragmented in 4 categories

Core luxury buyers

Luxury role models

Fashion fanatics

Middle-class aspirants

The Chinese luxury consumer

Significantly younger than its counterpart in other luxury markets

Trends away from ostentation towards understatement and subtlety

Desired product attributes

– Authenticity gives meaning to the purchase

– Well-known brand

– High quality

– Heritage

– Craftsmanship

– Innovative design

(McKinsey & Company, 2010)

80%

30%

19%

0% 20% 40% 60% 80% 100%

China

US

Japan

% of Luxury buyers under 45

Opportunities: What do end users value ?

Most important seat material factors when purchasing a vehicle

– 96% responded: “Durability”

– 91% responded: “Stain resistance”

– 91% responded: “Clean-ability”

– These factors also considered most “unmet” needs

Resale value: 72% noted that knowing leather seating increased

resale value would impact their decision to purchase leather

(Leather Seating Study 2010, The Planning Edge Inc.)

Labeling: 62% said labeling of the seats as

“Genuine leather seat” would influence their

purchasing decision

69% considered leather the most environmentally friendly seat

cover material

(Leather Seating Study 2010, The Planning Edge Inc.)

Opportunities: What do end users value ?

Challenges: Leather with high durability

Improved appearance in use over

lifetime, particularly important for light

colors

Typical failures pictured, flex cracking

and abrasion

Investment in R&D and finishing

technology

Benefits

Stays clean longer

– Up to 65 % more stain-resistant to denim transfer

Easy-to-clean

– Up to 75 % more cleanable against denim dye transfer

– Up to 85 % more cleanable against carbon-based soiling

Anti-Soiling leather

6

10.8

12.2

16.1

17.8

1.7

3

5.1 5.8 5.9

0

2

4

6

8

10

12

14

16

18

20

X1 X2 X3 X4 X5

Anti-soil leather Denim Soiled

Lower is Better

Soiling cycles

Anti soil leather Traditional leather

Traditional leather

Delta E Value

Preserving the luxury image – keeping leather

affordable for entry level vehicles whilst a

voiding the commodity trap

Product safety – cabin air quality –

low VOC emissions, low odor, low fogging,

low allergy, etc.

Green processes – resource neutral

industrial ecology

Opportunistic view of natural markings to

avoid unneeded loss of material

Challenges for leather supply chain

Leather design

Additional brand differentiation through

new technologies and surface effects

Differentiation by design

CAD-driven environment makes creative designs a reality

Leather is positioned as a luxury feature in the interior

With growing affluence in Asia, brand oriented luxury consumers will

demand quality

Suggesting brands should focus on high quality leather

Leather manufacturers globally will continue to focus on innovations

in processing, machinery and chemistry to reduce consumption of

precious resources

In summary

Durability of leather throughout the life cycle is a foundation

Low VOC is a given

There is scope for improved functional performance such as anti soiling

While maintaining functional performance, more design features are

needed to differentiate quality of leather and seating in automotive

interiors

In summary