Police spokesman Micky Rosenfeld said there was a strong possibility the blast was a criminal incident and a “settling of scores” but did not rule out political violence.
Israeli radio said the car belonged to the suspected head of an organized crime gang.
The black Mazda car burst into flames after being targeted by a motorcyclist nearby, Haaretz newspaper reported.
An empty bus nearby was also damaged in the explosion.
Israeli media say the car’s owner did not appear to have been in the vehicle at the time.
Correspondents say that in recent years Israel has become a ferocious battleground for criminal gangs involving several mafia families.
Wednesday’s blast initially prompted fears of a Palestinian militant attack. A blast in the city allegedly carried out by an Israeli Arab injured 15 people in November last year, during Israel’s campaign against Hamas militants in the Gaza Strip.
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