This is a soft rubber coating, which has a very nice feel. VW has been using it since at least 2000 MY, but it does not hold up. I know that in 2007 MY, VW started phasing this out on some models. My '08 X3 is peeling around the steering wheel controls- started within the first year. My former Touareg had the exact same issues.
It is a shame it is so vulnerable.
'08 X3, MT, Titanium Silver on Tobacco/Black with Brushed Aluminum Trim, Servotronic, Htd steering, rear side air, Park dist, Xenon, Nav, Priv Glass, Premium, Cold pkge.