UPDATE 1-Mexico auto output falls 25 pct in July yr-on-yr

(Adds quote from auto industry representative, background)

MEXICO CITY Aug 13 (Reuters) - Mexico's automobile production plummeted in July from a year earlier, but the fall was the least severe this year as Americans rushed to take advantage of the U.S. government "cash for clunkers" program.

Mexican auto production fell 25 percent in July compared to the same month a year earlier, the Mexican Automotive Industry Association, or AMIA, said on Thursday.

Most of Mexico's production goes to the United States, and output has been plunging all year in annual terms.

Auto sales in the United States jumped to their highest in 2009 so far in July on the incentive program, which allows people to trade in gas-guzzling old cars and trucks.

"This looks like good news, though it isn't a trend yet and we have to be cautious about it," said AMIA head Eduardo Solis said at a press conference.

Vehicle exports were down 25.6 percent in July compared to a year earlier.

Automakers credited the runaway success of the "cash for clunkers" program with lifting industry-wide sales back above 11 million units on an annualized basis tracked by analysts. (Reporting by Robert Campbell and Luis Rojas Mena; Editing by James Dalgleish)