Synthetic leather, also referred to as faux leather, is taking the industry by storm. Leather has always been a luxurious choice for many people, who wish to use it as a fabric for clothing, footwear or upholstery. However, the rising cost of genuine leather and the ever-increasing awareness of animal cruelty norms has fortunately paved the way for the development of man-made leather. Synthetic leather is a more cost-effective and animal-friendly substitute, which has almost all the same qualities of genuine leather.
Over the years, the Indian textile sector had all the tailwinds the businesses needed with large-scale investments coming in across the value chain. As a result, the scale of conventional textiles in India has grown. However, in spite of the growing demands of domestic and international markets, the conventional textiles sector is highly saturated. It is facing challenges such as high competition levels, high inflation rates, less control over prices and a decrease in profitability levels.
As our country is transforming into a developed nation, huge emphasis is being laid down in incorporating the latest technologies in various fields. Since the conventional textiles industry has reached a level of saturation in terms of development, innovation and value-addition, there is a dire need to explore other segments.
The need of the hour for India’s textile industry is to expand in niche segments and make the industry globally competitive. In the present scenario, the segment of technical textiles poses great potential for upgrading the Indian textile industry. It consists of an array of high-engineered niche products, where textiles provide a functional edge, rather than just acting as a surface. The most talked about alternative in the leather industry, synthetic leather, lies amongst the pool of technical textiles.
Classified as a coated fabric, synthetic leather is commonly of two types – Polyurethane (PU) based and Polyvinyl Chloride (PVC) based. It is manufactured by coating a base fabric, which can be woven, knitted or nonwoven; with any of the two mentioned polymers.
The global market has seen a paradigm shift towards vegan fashion, which refers to adopting non-leather products. As a result, synthetic leather products are dominating the market of various end-use industries such as footwear, upholstery for automotive, furnishing, apparel etc.
In 2017, the global trade of synthetic leather fabric was approximately US$ 9.8 billion, out of which US$ 6 billion was of PU coated fabric. In the last ten years, synthetic leather fabric has grown at a CAGR of 3.5%, amongst which PU leather and PVC leather have grown at a CAGR of 4% and 3%, respectively.
Figure 1: Global trade of synthetic leather (US$ Bn.)
Data Source: UN Comtrade
Globally, the major exporting nations for synthetic leather fabric include China, Germany, Korea, USA and Taiwan. Amongst these, China is the largest exporter, with a share of 45% in the global exports.
Vietnam is the largest importer of synthetic leather fabric with a share of 10% in the overall imports. Apart from being a significant exporter, China is also a major consumer of synthetic leather fabric, with a share of 9% in the overall imports.
Figure 2: Major exporting nations for synthetic leather (2017)
Data Source: UN Comtrade
Figure 3: Major importing nations for synthetic leather (2017)
Data Source: UN Comtrade
Synthetic leather has found increasing acceptance in global markets (traditionally dominated by natural leather) as cost efficiencies have gained prominence. Synthetic leather, being 4-5times cheaper than natural leather, has become the preferred choice in mass market products such as footwear, handbags and apparel. The major exported product categories of synthetic leather along with the top exporting nations is represented in the table below:
Table 1: Major exported categories of synthetic leather
Data Source: UN Comtrade
Countries like Viet Nam, Bangladesh and Singapore have a good share in the exports of finished products made of synthetic leather, such as footwear and apparel. However, these countries do not have domestic production of synthetic leather fabric and thus, have a high value of imports for the same.
At present, the domestic consumption of synthetic leather is estimated at ~565 million linear metres, which is expected to grow at a CAGR of 7% till 2021.
The Indian market segmentation for synthetic leather as per the end use industries is shown in the figure below:
Figure 4: Synthetic leather market segmentation
Data Source: Wazir analysi Others include apparel, accessories, luggage, floorings and stationary
The growing demand from these major end-use industries is expected to drive the synthetic leather market in the future. Some of the common uses of synthetic leather for different industries are given in the table below:
Table 2: Industry-wise usage of synthetic leather
| Industry | Uses | Type of Industry |
| Footwear | Insole Outer Sole | B2B B2B |
| Automotive | Upholstery | B2B |
| Furniture | Upholstery | B2C |
| Furniture | Upholstery fabric | B2C |
| Apparel | Jackets, Trousers, parts of garments, accessories | B2C |
Advances in manufacturing processes and innovation along with increasing affordability of luxury products in emerging markets are expected to stroke the demand for synthetic leather globally.
India is the 2nd largest producer of footwear after China, with an annual production of 2.2 billion pairs in 2017. Out of this, only 0.25 billion pairs (~11%) were exported, while the remaining 89% was for domestic consumption. In the same year, India overtook the US as the second largest consumer of footwear.
Figure 5: Top footwear producers
Data Source: World Footwear yearbook 2017
Figure 6: Top footwear exporters
Data Source: UN Comtrade
The trend of incorporating athletic shoes into our daily lifestyle and moving towards activity-specific footwear consumption is fueling the demand for synthetic leather in the footwear segment. Moreover, fluctuating climatic conditions in countries is creating the need for several types of footwear, further augmenting the demand for synthetic leather.
The consumption of textiles in automobiles is spread across applications such as carpets, upholstery, tyres, belts, airbags etc., which is estimated to be over 4.5 lakh tonnes globally. The textile material used amounts to 2.2% of the overall weight of the car. Approximately 40 square metres of textile material is used in an average car for interior components, 18% of which is used for upholstery. In the Indian market, synthetic leather is commonly used as upholstery fabric for mid-size cars.
As per the Society of Indian Automobile Manufacturers (SIAM), the domestic sales of passenger vehicles has increased at a CAGR of 7% over the last five years. The growth of the automotive segment is attributed to rising economic conditions and the need for comfortable commute. With the appreciating market for passenger vehicles, the usage of synthetic leather for upholstery is bound to increase.
The highest growth in demand for synthetic leather is expected to be witnessed in the furniture fabric segment. Growth in housing and commercial development along with increasing aspirations of the consumer will drive the need for synthetic leather.
The wide range of applications of synthetic leather and growing consumer and industrial demands is creating lucrative opportunities for investment in this segment.
Investors these days have the mindset of setting up businesses which require a large scale investment (~Rs. 300 – 400 crores), such as for conventional textiles. On the contrary, a technical textiles business can be set up with a small-scale investment (~Rs. 50-100 crores), as the addressable market is of a smaller size. Similarly, a synthetic leather manufacturing business requires an investment of less than Rs. 100 crores. With such businesses, organizations can diversify their business portfolio by simultaneously catering to different segments in the textile value chain.
The article has been authored by Sanjay Arora, Business Director and Swati Jain, Associate Consultant.
It was published in February 2018 in Fibre2Fashion.