Mexican automobile output plunged by nearly half last month as a recession in the United States - the key export market - reduced demand for new vehicles.

The Mexican Automotive Industry Association, or AMIA, said production slid 48.1% year on year while exports plunged 44.6%.

"We see with great worry that we have yet to hit bottom and the industry continues to be in free-fall," AMIA head Eduardo Solis told Reuters.

Around 70% of cars produced in Mexico go to the US which is suffering its worst downturn in almost 30 years.

Mexico's economy has been hit hard by the collapse in auto production and is expected to shrink more than 6% in 2009 - its worst downturn in at least 15 years, the report noted.

Prospects of a rebound in the short term appeared increasingly uncertain given the auto industry's fortunes.

"Today's auto sector data confirm what we have long feared - that the auto sector would be in severe decline for a prolonged period given the deep decline in US demand and the restructuring pressures centred around GM and Chrysler," Nick Chamie, head of emerging markets research at RBC Capital Markets, told Reuters.

"There is little chance of a near-term sustainable revival and this of course, given its relative importance within the overall economy, will be a significant drag for the overall economy for the remainder of this year," he added.

General Motors Mexico late last week said it would slash 300 more jobs as it reels from a sharp decline in US and Mexican demand.

Other major local players include Nissan, Ford and Volkswagen.