RAFAH, Gaza Strip, April 14 (Reuters/Nidal al-Mughrabi) - Israel wants to close down the smuggling tunnels between Egypt and the Gaza Strip, but the tunnelers have become so good it's now possible to drive a car through them, literally.

Time was that a car had to come through the tunnels piece by piece, but Hamdi Abu Karesh recently got a 2010 Hyundai Elantra delivered to him intact.

It's a unique feeling, said Abu Karesh, 60, whose shiny new saloon was smuggled in from Sinai via a wide tunnel, to beat the blockade maintained by Israel and Egypt for the past three years.

There is nothing like driving a brand new car.

Abu Karesh's Hyundai costs about $20,000 in Egypt. But he had to pay $31,000 for it to a Gaza dealer, plus $9,000 more for registration and other charges levied in the enclave, which has been run since 2007 by the Islamist movement Hamas.

Gaza tunnelers trying to satisfy pent-up demand for all sorts of goods prohibited by Israel first began bringing in cars in pieces and reassembling them in Gaza. Now there are tunnels big enough to drive through.

Only those who have money and want to drive a new car can afford one smuggled from Egypt, dealer Eyad Al-Araeer said.

Car smuggling also is risky. Buyers have to pay up front in case of slip-ups. Egyptian security last month confiscated a shipment of 41 vehicles, inflicting serious losses on dealers and clients alike.

But even used cars in Gaza cost way over the average because of the blockade and spart parts are very pricey.

BAD BUSINESS

Palestinian entrepreneurs have smuggled everything from food to fuel to livestock through hundreds of tunnels to Egypt's side of the border, and Hamas has brought in weapons to maintain its armed resistance to Israel, which it does not recognise.

But recently the sound of generators has faded and the dust raised by thousands of tunnel workers hauling merchandise into the blockaded enclave is settling.

Tunnelers say much of the business is on hold, due to a new steel wall Cairo is installing underground to block the smuggling, plus its stepped-up security campaign against Egyptians helping Palestinians to bring in goods.

I have been unable to get anything through for two weeks, so I am closing it, Abu Hamza said before sealing the shaft of his tunnel with a wooden board.

Not even a straw can get through, not as much as a thread, he added.

Abu Hamza said he had sent home 15 workers who used to work two shifts because of the Egyptian clamp-down. Security men from Hamas confirm the trade has shrunk dramatically. Workers now number in the hundreds rather than thousands.

Israel recently began to ease up on its blockade of the Gaza Strip, allowing in some goods it used to ban, such as clothes and shoes and, this week, wood and aluminum.

That will dent profits for traders already holding stocks of such materials smuggled from Egypt at a premium.

Merchants pay a fee for things they bring through tunnels so when Israel allows in similar goods their prices will be cheaper, Abu Hamza said.

If it lifted the ban on imports of goods these tunnels would become unnecessary.