Domestic car sales are expected to be down 7.5% this year, which is still considerably better than had been predicted, Toyota Motor Corp's Thai unit said on Tuesday.
In January, Toyota said local auto sales were expected to decline by 10% year-on-year to 720,000 units.
It attributed the improved sales outlook to government economic stimulus measures expected to boost spending in the second half of the year.
Thailand is a regional production and export hub for the world's top carmakers, and the sector accounts for around 10% of the nation's GDP.
Car sales have declined almost every month on a yearly basis since May 2013 following the fading effect of a government car subsidy scheme that ended in 2012, plus weak domestic consumption.
In 2015, overall domestic car sales fell 9.3% to 799,594 vehicles.
Toyota, which commands about a third of the country's auto market, would keep its domestic car sales target at 240,000 cars, or down 9.8% from 2015, said Kyoichi Tanada, president of the Toyota Thai unit at a news conference.
Toyota's sales in Thailand slipped 18.7% to 266,005 cars in 2015.
While the sector should get a boost from government spending, strong tourism and new car models, it was not expected to recover soon, he said.
"Thailand's slowing economy, limited purchasing power and global economic uncertainty mean time is needed before we see a recovery in the auto market," Mr Tanada said.
In a bid to lift the economy, the government has introduced stimulus measures and ramped up investment in infrastructure.