BANGKOK: Suspected militants raided a car dealership in southern Thailand and turned two of the cars into bombs, police said on Thursday, adding that a "new generation" of Muslim separatists was operating in the insurgency-plagued region.

A group of men raided the dealership in Songkhla province near the border with Malaysia on Wednesday and made off with a car which exploded on a rural road in neighboring Pattani province, prompting an exchange of gunfire, police said.

A second car bomb exploded on Thursday, damaging property.

A car dealership employee who was held hostage was shot dead by the suspects, police said. One of the suspects was also killed in the violence.

A decades-old insurgency in the Muslim-majority southern provinces of mostly Buddhist Thailand has claimed more than 6,600 lives since escalated in 2004.

"We know the name of the group that was responsible for this incident. It is a new, younger generation, kind of group," Police Lieutenant General Sakorn Thongmanee, head of Provincial Police Region 9, told Reuters.

Thailand's three southernmost provinces of Pattani, Yala and Narathiwat were once part of an independent Malay Muslim sultanate until annexed by Thailand in 1909.

Insurgents from Thailand's Malay, Muslim minority want independence for the south. The groups rarely comment on attacks.

Observers and groups monitoring the south said they were seeing signs of restlessness amongst a younger generation of separatists.

"This might be a change in tactics because in the past the state has suppressed separatists considerably," Srisompop Jitpiromsri of Deep South Watch, an organization that monitors the violence, told Reuters.

Talks between the government and a handful of shadowy insurgent groups began in 2013 but little progress has been made.