It's an interesting question. I think there are a few factors:
1. Even people who aren't vegan or vegetarian are increasingly trying to be 'sustainable' and anything that appears that way is popular.
2. The demand for beef is moving from the west (sustainability again, particularly deforestation and emissions) to the east (the Chinese have developed an appetite for steak). That partly means the market for leather has moved geographically. It also means that the quality of leather is lower (it's partly a result of animal welfare - not a strong point in China).
So, it costs more and is becoming less desirable. As for what happens to the hides, they're not worth very much so they're probably getting burned. The cost of leather is in the tanning.
I have 'leather' (some leather, some vinyl) in my car. Mostly because it's easy to clean and I like light interiors.
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