One theory is the occupants were planning to bomb a march by the EDL taking place just hours later.
Counter-terror police were yesterday investigating whether two men found with a bomb in their car were on their way to attack an English Defence League rally.
They discovered the Afghanistan-style explosive device by sheer chance when they pulled over the vehicle on the M1.
Also hidden in the boot were two guns, ammunition and leaflets warning “infidels” not to follow the EDL, David Cameron and the Queen.
One theory is the two male occupants were planning to bomb a march by the notorious anti-Islamic group taking place just hours after they were stopped.
Officers only discovered the guns and bomb two days after impounding the car for having no insurance last Saturday.
By then police had already let the driver and passenger go.
Detectives traced the owner of the car and armed police carried out raids in Birmingham and West Yorkshire this week. Seven men were arrested.
It is the first time such an improvised explosive device – used by Taliban insurgents to kill British troops in Afghanistan – has been found in the UK.
Almost 500 members of the EDL marched in Dewsbury last Saturday, where one of the suspects lives.
They had widely publicised the event – bragging that they were coming to take over the “Islamic republic of Dewsbury”.
It is not known how big the suspect device was or the destruction it could have caused if detonated.
Saturday’s incident began when uniformed motorway cops pulled over the car as it travelled south on the M1 between junctions 33 and 34 in South Yorkshire.
The numberplate recognition system in their vehicle alerted them that the vehicle was uninsured.
It is believed one of the unsuspecting officers drove the vehicle to a local police pound where the driver and passenger were freed.
It was only on Monday, when a full inspection of the car was made, that the IED, weapons and leaflets were discovered.
This sparked the huge Midlands anti-terror hunt for the occupants and any of their accomplices.
West Midlands police arrested three men – believed to include the driver and passenger – aged 23, 26 and 27 in Sparkhill, Birmingham, on Tuesday.
A 23-year-old and two men aged 22 were held in raids in the Alum Rock, Smethwick and Moseley areas of the city the following evening.
A man of 43 was arrested in Dewsbury on Thursday.
Anti-terror officers spent yesterday searching a house in the town belonging to Mohammed Mohazim Akbar.
All the suspects who were arrested were last night being quizzed on suspicion of the commission, preparation or instigation of acts of terrorism.
It is believed two of the men arrested in Sparkhill are brothers of a terror suspect currently awaiting trial in the UK.
The 20-year-old is accused of collecting money for terrorism, travelling to Pakistan for terrorism training and travelling abroad to commit acts of terrorism.
A West Midlands police spokesman said: “The arrests followed a routine stop.
“Firearms, offensive weapons and other material were later found hidden inside, prompting police to take action to trace and arrest the driver, passenger and others suspected of being involved.
“The items from the vehicle are currently undergoing forensic analysis and searches are or have been carried out at the addresses of those in custody.”