Baxter also lost in the opening round of last year's event

The Lancastrian, twice a runner-up for the BDO version of the world title, struggled to find any consistency against his 25-year-old opponent.

Gray, from Sussex, will meet either 1988 world champion Bob Anderson or Darren Webster in the second round.

Defending champion Phil Taylor beat Austrian qualifier Anton Pein 3-0.

South African Wynand Havenga knocked out 26th seed Steve Maish 3-2.

The 41-year-old finance manager from Cape Town is the first player from his country to contest the World Championship.

After prevailing 5-3 in legs in the decider under the tie-break rule, will now meet three-time runner-up Peter Manley in round two after the 7th seed defeated Dave Jowett 3-0.

"I enjoyed the match but it was tough," said Havenga. "I didn't throw like I can because of the pressure."

Another seed made an early exit when Ireland's Mick McGowan handed Matt Clark of England, ranked 31st in the event, a 3-1 defeat.

McGowan will meet Taylor in the second round, having defeated the 13-time champion in Holland two months ago.

"That's what gets us up in the morning, to play Phil, because he's the best," said the 33-year-old qualifier.

"I've been playing well all year and done okay on the circuit but this is completely different to any other tournament. It's just phenomenal."