A secret message is received from a spy named Leland Turbo (Jason Isaacs), giving information about a secret location, and something even more sinister. The coordinates provided in Leland's message are followed by Finn McMissile (Michael Caine), who charters a fishing boat to the coordinates. As they get close, a large armored carrier appears and demands the fishing boat turn around. As it does so, Finn sneaks aboard the carrier.
It takes him to an area rife with oil derricks. Finn ascends one of the derricks, and finds numerous lemons (aka small vehicles that often have engine trouble and need constant upkeep) milling about. He radios in to contact Leland, but is treated to two shocking sites: a tv camera in a special case with the logo World Grand Prix on the side, and Leland Turbo-having been killed by being crushed into a cube!
The lemons suddenly notice Finn, and give chase. Finn takes out some of them, before plunging off the derrick into the water, and activating his hydrofoil mode. Several lemons climb aboard the armored carriers and give chase, firing their weaponry. One of them appears to score a direct hit, and Finn's tires bob to the surface in the fiery aftermath. Unseen to the lemons, Finn has dove down, activated his submarine mode, and piloted away.
Meanwhile, in Radiator Springs, Lightning McQueen (Owen Wilson) has returned from his latest racing season, having won his 4th Piston cup. The win holds special meaning for Lightning, as this is the first year that they have renamed the Piston Cup in honor of Doc Hudson, who has since passed away. Mater is overjoyed that his best friend is back, and fills their first day with a full plate of things to do. However, Lightning tries to convince Mater that he also wishes to spend time with Sally that evening.
Mater claims he understands, but that evening at the Wheel Well Motel, he shows up as their waiter. Trying to get them drinks, Mater is distracted in the Motel's bar when the news tells of famed millionaire Miles Axelrod, who has turned himself into a fully-electric vehicle and developed a new alternative fuel source called Allinol.
Axelrod is sponsoring a race dubbed The World Grand Prix, of which the news is interviewing one of the race entrants named Francesco Bernoulli (John Tuturro). The talk turns to Lightning having turned down an invite to the Grand Prix due to having just completed his current racing season. Francesco brags how much better of a racer he is than Lightning, causing Mater to call up the news program and defend his friend.
The news and Mater's call soon attract Sally and Lightning inside (as well as several other patrons). When Francesco seems to have insulted Mater over his fandom of Lightning, Lightning gets on the phone and vows to put aside his vacation and enter the World Grand Prix.
Lightning assembels his pit crew (made up of Sarge, Fillmore, Luigi, & Guido), and also (at Sally's urging) asks Mater to come along and help with the pit crew. Mater is eager to travel with his best friend, and soon the gang jets off to Japan for the first leg of the race.
The crew tours the sites, before going to a pre-game party where Lightning meets Francesco and the other racers. Also in attendance are Finn, and new field-agent, Holly Shiftwell (Emily Mortimer). Finn's photos taken at the oil derricks do not provide sufficient information, but both agents are in Tokyo to meet up with an American spy who will be doing a drop-off of more concrete photo evidence. However, the two note that there are several lemons milling about the party, and suspect they may be up to something here as well. During the party, Miles Axelrod makes an appearance, and claims the World Grand Prix will show the world that his alternative fuel works just as well as gasoline. As part of the promotion, all of the racers in the event will be using Allinol.
Mater soon gets himself into trouble by mistaking wasabi for pistachio ice cream, and 'leaking oil' during Lightning's introduction on camera (though Mater insists it wasn't him). Mater rushes off to the restroom to clean-up. While in a stall, the American spy enters the men's room, a sports car named Rod Torqueline. However, he is soon accosted by two lemons: Grem, and Acer. The two rough up Torqueline, but are interrupted when Mater exits the stall. Rod has activated the homing beacon on the information packet he has, and attaches it to Mater's undercarriage to keep the information from being retrieved by the lemons.
As Mater exits the men's room, Holly is shocked to see that the homing beacon is coming from Mater. Though she is unsure, Finn convinces her that Mater is their contact, and Holly is slightly convinced when Mater actually answers her test question correctly (though it's about older vehicles, something Mater is an expert on). Though Mater claims he's busy, he and Holly agree to 'rendezvous' the next day. Mater tells the others about meeting Holly, but his friends do not believe him.
Later on that evening, Rod Torqueline is tortured by the lemons and Professor Zendepp. Rod is fueled with Allinol, but then has a special laser trained on him. Zendepp explains that when heated to a high temperature, Allinol can become an explosive. The group displays a number of pictures of possible people that Rod could have given the information to, and when Rod's gaze lingers on an image of Mater, the group make plans to eliminate Mater as Rod's engine explodes.
The next day at the race, Mater joins the rest of Lightning's crew, and the race appears to be going well, until Holly's voice comes over Mater's headset, trying to warn him that several lemons are nearby, and intend to get him. Mater doesn't realize that Holly is contacting him on a secret frequency, and his voice distracts McQueen, giving him incorrect racing information, and causing Francesco to pull ahead and win the race by mere seconds. The race also takes a shocking turn when a couple of the racer's engines blow out (a result of Grem and Acer using the camera-disguised laser that was used on Rod). Miles Axelrod is called into question regarding this, and promises that his alternative fuel source is safe.
In the aftermath, McQueen and Mater have a falling out, and Mater quietly leaves the team. While at the airport, Mater is met by Finn, who quickly leads Mater on a chase onto the tarmac as Grem and Acer give chase, intending to take both of them out. The two are quickly saved by Holly and a spy plane named Siddily.
Back at the hotel, Lightning and the crew find a goodbye note from Mater, claiming he is going back to Radiator Springs. Lightning feels bad that he has driven his friend away, but he feels some comfort in knowing that Mater will safely be back home.
Meanwhile, Holly has found the hidden information in Mater's undercarriage, and is analyzing the photos. The photos show a vehicle with an open hood, exposing an engine, as well as a number of spare parts. Both Finn and Holly are clueless as to the items, but Mater's knowledge of spare parts allows him to recognize them as the kind of parts used in 'lemon' vehicles. Amazed at this information, Finn has Siddily fly to Paris.
In Paris, Finn finds a seedy parts dealer named Tombar (pronounced Tom-bay). The vehicle tells Finn, Holly, & Mater that the parts in the picture look like some he sold an unknown contact in Porto Corsa. Tombar has also heard a number of lemon vehicles are making there way their as well. Finn then knows where he and his cohorts should head next.
Meanwhile, Lightning and the others have stopped in a little village where Luigi's Uncle Topolino and his Mama are. A festive party is held for Lightning and his friends, but Uncle Topolino notes that Lightning seems a little dour. Lightning confides about how he feels he pushed his best friend away, but Uncle Topolino gives Lightning some words of wisdom.
Meanwhile, Finn, Holly, and Mater have secretly arrived in Porto Corsa. Holly's wiring into the local security cameras shows a large number of lemons going around, and a couple well-preserved models being towed around town. The Finn and Holly recognize a couple as being part of large crime syndicates, and upon seeing one of the groups being towed by a tow-truck with a very similar appearance to Mater, it is decided to send Mater undercover.
Mater is equipped with a disguise program, but Holly notices the disguise doesn't completely cover him up due to a large dent. Holly is all for fixing the dent, but Mater refuses, claiming that each dent is important to him. Holly respects his request, and works the disguise around this limitation.
Mater waits for Holly to let him know once their intended target is detained, and spends a few moments talking with Finn. Mater insists that he is simply a tow-truck, but Finn simply feels that Mater is still acting like a fool as part of his spy disguise. Hearing himself being considered to be a fool by Finn gives Mater a moment to reflect on himself, before Holly returns with the knocked-out target.
Mater dons his disguise and goes into the hotel where the lemons are meeting. It is there they are greeted by Professor Z, and are contacted by camera to their benefactor. However, like the spy photos, only the leader's exposed engine is shown, and his voice is disguised. He then explains to the lemons his grand plans.
With Professor Z having found out about Allinol's explosive connotations, they intend to sabotage the World Grand Prix, and destroy Miles Axelrod's plans to create a clean energy source. Once Allinol is finished, the lemons will have the last laugh on the world's energy woes, as their leader has found a large source of oil in the Atlantic Ocean, and intends to sell their stock at inflated prices.
To cap off the festivities, the group are treated to race footage currently happening Porto Corsa. As they watch, 3/4 of the racers are eliminated by Acer and Grem using the laser. In the end, only Lightning and Francesco cross the finish line, but totally in the dark regarding the fate of their other racers.
During this time, Finn is detained by a helicopter of Z's, and Holly is captured as well.
Back in the hotel, the lemons are toasting their success as Miles Axelrod sadly proclaims he will forgo the use of Allinol in the final race in Britain. However, the festivities grind to a halt when in an interview, Lightning claims he will still use Allinol in the final race, as Fillmore has deemed it to be safe. Professor Z and the group's leader both proclaim that Lightning McQueen is the new target, as his victory in England using Allinol will ruin the group's plans.
Fearing for his best friend's life, Mater rushes off to tell McQueen, but accidentally decloaks from his disguise. Mater intends to reach Lightning and tell him, but only gets to the edge of the press crowd before the lemons' spies detain him.
Mater is knocked out with gas, and in his knocked-out state, Finn's talk about acting a fool circles around in his head, as he recalls alot of the embarrassing things he has done in the last few days. When he awakens, he finds himself tied inside Big Bentley in London, along with Finn and Holly, who are minute away from being crushed in the clock's giant gears.
Down on the racing circuit, Lighting and his crew have now been joined by the rest of the Radiator Springs gang (minus Lizzie). After thinking he heard Mater in the crowd in Porto Corsa, Lightning contacted his friends back home, but when they reported they had no idea where Mater was, they came as quickly as possible to be with Lightning. Also on hand is Miles Axelrod, who thanks Lightning for not giving up on Allinol.
As the race gets underway, Acer and Grem (inside Big Bentley) attempt to use their laser on Lightning...only to find it has no effect on him! They quickly leave to take care of him themselves, but let Mater know they have planted a bomb nearby that should take care of Lightning if all else fails.
After they leave, Mater realizes that his gatling guns (though empty) create enough friction to sever the threads in the rope he's tied up in. Mater wants to save Finn and Holly, but the two demand he save Lightning.
After he leaves, Holly manages to get them untied, but nearby find Mater's filter, leading them to a shocking conclusion. The two quickly race to the pit area, where they check Mater's engine. Sure enough, in place of his filter, a bomb has been welded to Mater's engine block! However, after they realize this, Lightning notices his friend and quickly drives over. However, Mater begins driving backwards as fast as he can, afraid he'll hurt his friend. Lightning continues to follow unsure just why Mater is driving away from him.
Meanwhile, Finn and Holly find the Lemons' crime bosses nearby, but Professor Z drives off. Finn manages to catch him, and returns him to Mater. Finn demands that Z deactivate the device, but the Professor reveals two things: the bomb is voice-activated, and his voice will not deactivate it. Mater and his friends are unsure what to do as the clock ticks down, until Mater suddenly activates his rockets, and flies back to the main starting area.
There, in the presence of The Queen and her son Prince Wheeliam, Mater confronts Miles Axelrod, claiming he's the one behind the entire scheme. Mater accuses Miles of just pretending to have turned himself all-electric, and that most likely, his engine requires the spare parts that he saw in the photos. Mater also claims that lemon-like engines tend to leak easily, and he knows that the leak during the Tokyo pre-game party was made by Miles, who pinned it on Mater. Miles continues to deny this until the last seconds of the bomb's countdown, when he voice-deactivates the bomb, proving Mater's theory to be correct.
In the aftermath, Mater is knighted by the Queen, and returns to Radiator Springs a hero. Since the World Grand Prix has been called off, Lightning and his friends invite the entrants to their town for a nice, friendly race. As it gets underway, Finn and Holly stop by. Holly whole-heartedly admits to being Mater's girlfriend, but the two spies have come to request Mater's help on an upcoming mission. However, Mater feels he is better suited to staying in Radiator Springs. However, before the two spies leave, they give in to Mater's request to keep the rocket engines installed in him. With his newfound speed boosters, Mater, Lightning, and their new friends, race their way through the twisting roads surrounding Radiator Springs and Ornament Valley.