According to Mexico’s Instituto Nacional de Estadística y Geografía (INEGI), the production of light automobiles rebounded in May 2020. Up more than 494% from April, the country managed to piece together 22 thousand units last month. And that was still 93.7% fewer than had been assembled during May 2019.

Auto production had been down almost 99%, so the rebound to -93.7% seems especially large particularly when you focus in on the short run rate of change. Near 500% sounds like an awesome turnaround, a sign of maybe something big, if that’s all you know.

COVID-19 shutdowns are being blamed, the disruption to supply chains which in autos are integrated across geography. Yet, why is the auto industry the only one forced into near-total stoppages? Not just in April, now for the second straight month and not just in Mexico.

Carmakers are an extreme example of what is surely an underlying economic problem, only (somewhat) caused and unleashed by the governmental overreach.

There’s more than just COVID-19 in these numbers, especially autos where especially liquidity and cash for working capital is crucial. Inventory + lack of liquidity = going out of business fire sales. Preserve cash at all costs, even if it means shutting everything down in every manufacturing location. Temporarily, of course.

The Big “D.”

There’s even the difference between sales and production to further corroborate the difficulties. US auto sales, an important contributor to Mexico’s vehicle industry, actually did rebound in May according the American Bureau of Economic Analysis. Bottoming out at a pace of 8.7 million (SAAR) in April, light vehicle sales came back to 12.2 million in May.

That was still down about 30% from the same month in 2019, of course, but it sure wasn’t anywhere approaching zero. Apparently, dealerships and their customers hadn’t been totally prevented from their business in the same way we are supposed to believe automakers had been.

No, the difference between production and sales is extreme caution being exercised by a cash-intensive industry pushed precariously on edge. Jay Powell’s magic words won’t (can’t) keep the lights on.

Gigantic positive numbers like we’re going to see more and more don’t mean as much as you’ll be led to believe. They only seem awesome if you completely ignore the even larger minuses which have preceded them everywhere.

For the record, car production in Brazil blew away Mexico’s “measly” +500%. Compared to April, Brazilian volume surged 2,232% in May. Then again, that was only because Brazil beat Mexico in April, too, only on the downside. While the latter managed -98.8%, the former had produced -99.3%.

The numbers look huge when you’ve been forced into starting from so small. If you aren’t careful, gargantuan positives can distract you from noticing the even more enormous hole and the tremendous damage you’ve already been stuck with. This kind of distraction will be the exact purpose of many over the coming months.