BANGKOK—Thailand’s lucrative automotive industry has yet to recover from months of political instability, with Toyota’s local arm forecasting Tuesday that its own annual sales in 2014 would drop 25.9% year-over-year to 330,000 units.

But Kyoichi Tanada, president of Toyota Motor Thailand, the country’s largest auto maker, said a turning point had been reached with the May 22 coup, consumer sentiment was improving and Toyota would keep…