The story is about race car Lightning McQueen and tow truck Mater head to Japan and Europe to compete in the World Grand Prix, but Mater becomes sidetracked with international espionage.A group of "lemon" cars led by Professor Zündapp and an unknown mastermind owns the largest untapped oil reserves in the world. They secretly plot to secure their oil profits by using a weapon disguised as a television camera to ignite the Allinol fuel in targeted race cars during the World Grand Prix; with no apparent cause for the explosions, the public would doubt the fuel's safety and depend further on the group's oil. British spies Finn McMissile and Holley Shiftwell attempt to foil their plot. They attempt to rendezvous with American spy car Rod "Torque" Redline at a World Grand Prix promotional event in Tokyo in order to receive information about the mastermind; however, Redline is cornered by Zündapp's henchmen and passes his information to an unsuspecting Mater before being captured and subsequently killed. As a result, Shiftwell and McMissile mistake Mater as their American contact.Rendered unconscious, Mater has a mortifying dream where he sees his recent activities in a different perspective and realizes how foolish he has been acting, until he wakes up tied up inside Big Bentley along with McMissile and Shiftwell, minutes away from being crushed by its gears. The criminals use the weapon on McQueen during the race, but nothing happens. Mater manages to escape in order to warn his friends of a bomb planted in McQueen's pit area, but McMissile and Shiftwell find that the bomb was planted on Mater. They warn Mater about the bomb just in time, and Mater flees to protect his friends. However, he is pursued by a repentant McQueen determined to make amends to his friend, unaware of the real danger until they are out of range of Zündapp's remote detonator. He sends his henchmen to kill McQueen and Mater, but they are foiled by the combined efforts of McMissile, Shiftwell, and the Radiator Springs residents. Upon his capture, Zündapp reveals that only the person who installed the bomb can deactivate it. Mater then figures out that the mastermind behind the Allinol plot is Miles Axlerod. Axlerod confirms Mater's suspicion when Mater confronts him and he is able to deactivate the bomb.
For stopping Axlerod's plans, Mater is knighted by the Queen and returns home with his friends, where the cars from the Grand Prix take part in the unofficial Radiator Springs Grand Prix. Fillmore reveals that before the last race, Sarge replaced Lightning's Allinol with Fillmore's organic fuel, which prevented Lightning from being affected by the weapon. McMissile and Shiftwell invite Mater to join them in another spy mission, but he declines, claiming that he is where he belongs.