Last week the country's biggest Nissan dealer, Windsor Motors, revealed that by the end of 2007 it will have invested 50m in its retail network over three years.

Such hefty investment will be out of many dealers' reach.

Michael Purcell, sales director with Dublin-based Esmonde Motors, the country's largest Ford dealer, said last week it is almost certain some dealers are already feeling the pinch.

"My personal opinion is that there are dealers out there who have existing borrowings and will now have to go for more to redevelop their forecourts, and I think there are going to be some who are squeezed out of the business, " he said.

He added that Esmonde Motors is currently negotiating the acquisition of a new site in the busy, and highly priced, Stillorgan area of Dublin, and will have to develop its existing site in order to fund the roughly 10m investment in its new forecourt.

"When you're designing your new premises now, you've got to be thinking in the back of your mind that if it doesn't work out, what can I change this premises into?"

The removal of the EU's socalled block exemption rule allowed car dealers to situate their showrooms as close as they want to an existing forecourt, while also enabling them to sell any marque they want.

But to do so, manufacturers have implemented strict rules regarding the types of premises their vehicles can be sold from, demanding high-spec developments that don't come cheap. Some dealers are bailing out.

The raised financial bar has already forced some dealers to concentrate solely on the second-hand motor trade, rather than off-loading new cars, Purcell said.

"The second-hand market is cut-throat this year, " he said. "I've been in the market for 33 years and I've never seen it like this. There are dealers out there who now feel that it's more lucrative to be in that side of the business than selling new cars. I think a lot of the guys who couldn't afford to spend money on upgrading forecourts are concentrating on the secondhand sector."

One industry insider says that despite the public perception, margins in the business remain very tight.

"Things aren't as buoyant out there as people might be led to believe."

Those tight margins are revealed in company accounts. Windsor Motors, for example, reported turnover of almost 180m in the 12 months to March 2005, and an operating profit of 3.33m.

That compared to figures of almost 159m and 3.29m respectively the previous year.

One of Windsor Motors' refurbished Dublin sites opened this weekend. The development cost of that site was a cool 6m.

Windsor Motors' chief executive, Michael Herbert, said the company has also acquired an Opel dealership from industry longtimer Sean Crosson, for an undisclosed amount. That Opel business is being shifted to what has become a magnet for swanky new car showrooms at the Airside retail park on Dublin's northside.

"As a group, we've invested more in the business in the past five or six years than we did in the previous 30 years combined, " Herbert said.

He too believes the financing needed to revamp showrooms will lead to an industry shake-out. "There's no doubt about that, " he said. "There are a lot of people who were sitting on the fence wondering what was going to happen to the industry before the block exemption was removed.

They were probably just going to hang on as long as they could without making an investment and by not making that investment, ultimately the decision was made for them. They've sold out."

There is "no doubt, " he says, that the block exemption prompted a lot of people who may not have traded very well over the years to sell the property and retire or go into another business. "There's no doubt that the block exemption move forced a lot of that to happen in the past couple of years."

Despite a record 43,106 new car registrations in January, the Irish car market has taken more of a dip than usual in the past few weeks. Some dealers put this down to prospective buyers being hit by higher interest rates and utility prices.

Others say consumers are holding off purchasing new cars until their SSIAs mature.

For most savers, that will happen next year.

Frank Hogbin, managing director of BMW and Mini dealer Joe Duffy Motors, said that despite an apparent dip, the dealership is still just 10 cars shy of its 120 quarterly BMW target. It will deliver 50 BMWs this week, putting it substantially ahead. "We've already hit our target on Minis, while used car sales are going okay too, " he said.

Car dealers hoping for a repeat of the boom year of 2000, which saw roughly 230,000 new cars registered in Ireland, are not likely to see the halcyon days reappear this year. But the feeling is that they may get close.

"Sales of new cars in Ireland are likely to be up by between 5-10% this year compared to 2005, which will bring it up to about 190,000, " Herbert said, adding that "2007 could potentially see the same sort of sales levels as 2000."