I can see some dirt or dark smudges on the exterior side of the seat. There is some vertical peeling which brings the presumption of a puncture / insertion that cut the material. If you look properly, the darker smudge ends up at the vertical tear maybe something was pushed and in the end cut the material in that place pushing it upwards. A vertical piece sticking out shows that it was cut, not cracked.
Leatherette doesn't have elasticity like leather, so regardless that you conditioned the material there is only that much it can stretch to.
I presume that you can order a new OEM seat cover and replace it.
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