AutoNation Inc., the largest new-car retailer in the U.S., has terminated its Bankston Lincoln Mercury franchise in Dallas and plans to move BMW of Dallas to Lemmon Avenue.

AutoNation returned Bankston Lincoln Mercury to Ford Motor Co. "We will use that facility for other purposes," Mike Maroone, president and chief operating officer of AutoNation, said in a recent interview.

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Ten years ago, AutoNation came into the Dallas market with a bang when it paid a shocking $78 million in stock for the Lincoln Mercury facility on LBJ Freeway in North Dallas, a Ford dealership in Frisco, two Nissan stores and a Saab franchise.

But AutoNation has long struggled with the Lincoln Mercury franchise, selling only 253 vehicles last year, according to The Freeman Auto Report. In December, Eagle Lincoln Mercury – a 44-year-old dealership that was part of a thriving family-owned auto group – sold its franchise to Park Cities Ford to be folded into the dealership's operations.

"Bankston was the first group we acquired in this market," Mr. Maroone said. "But Lincoln Mercury has suffered as a brand."

The Fort Lauderdale-based dealership group hopes to put another new car franchise into the Bankston location in the 4700 block of LBJ Freeway, he said.

Meanwhile, BMW of Dallas – one of nearly 20 AutoNation dealerships in this area – will move to the former Eagle Lincoln Mercury site in the 6200 block of Lemmon Avenue.

Lemmon Avenue has become a major retail boulevard for high-end vehicles, and AutoNation is trying to add property to the Eagle site so it can build as big a BMW dealership as possible. The facility won't open for more than a year.

"When we're all done, it will be in the neighborhood of eight acres," Mr. Maroone said. "Land on Lemmon Avenue is very scarce. We want to make the store as big as we can."

AutoNation will be under some pressure to make the new BMW dealership stylish as well as large.

Earlier this year, Classic BMW opened a huge, lavish 155,000-square-foot facility on a 25-acre site in Plano. Essentially, Classic will have the north end of the Dallas area and BMW of Dallas the south.

"We think that site is going to be really good for us," Mr. Maroone said. "Texas is the strongest [new car] market in the country right now. We'll make it absolutely first class."

No decision has been made about the Mini franchise at BMW of Dallas, he said. "We're not quite where we need to be on Mini yet," Mr. Maroone said.

Auto retailers are adjusting to an increasingly tough, competitive market. Although new vehicle sales in the four-county area were up 2.2 percent through May, many domestic brands have experienced substantial sales drops while import brands such as Toyota and Honda have grown. And competition among area Toyota, Honda and Nissan dealers is fierce.

"The Bankston closure really tells you how difficult this business is and how much things have really changed," said Drew Campbell, president of the New Car Dealers Association of Metropolitan Dallas.

With AutoNation's decision, the Dallas area is down to seven Lincoln Mercury dealerships. But Ford officials expect to award the Bankston Lincoln Mercury franchise to another dealer, probably in the suburbs.

"We have a letter of intent, but we have just begun the state process" required before a new franchise can be granted, said Dave Mondragon, general manager of Ford's Southwest region, which includes Texas and Oklahoma.

Driven mostly by the new MK-X crossover vehicle and Navigator SUV, Lincoln sales were up 9 percent in the Southwest region through May, Mr. Mondragon said. Nationally, Lincoln sales increased 11.8 percent through May while Mercury's were down 6.3 percent.

Lincoln also ranked high in recent quality surveys.

AutoNation won't let the Bankston Lincoln Mercury site stay vacant for long. The decision to terminate the franchise was made "in the last 90 days or so," Mr. Maroone said.

"Our preference is to put a new-car franchise in there, but we're still working on it."