Lightning McQueen and the other racers of the Piston Cup racing series find themselves struggling to win against next-generation rookies like Jackson Storm who utilize advanced technology and training methods. As Storm's success attracts other rookies, the older racers retire or are pushed out. In the final race of the season, McQueen suffers a violent crash trying to overtake storm leaving him badly injured.
After recovering McQueen decides to return to racing and calls his sponsors who reveal they have sold the team to a new owner named Sterling. Sterling assigns McQueen to train under Cruz Ramirez, where McQueen fails to adapt to the modern training methods. Because of this Sterling tries to force him to retire. Refusing, McQueen instead offers to retire if he does not win the first race of the season.
McQueen tries to train on nearby Fireball Beach but ends up spending most of his time teaching Cruz how to drive on the sandy terrain. McQueen then attempts to join a race incognito at a famous dirt track called Thunder Hollow, but inadvertently enters a figure-8-style demolition derby with Cruz, which she wins. McQueen's identity is also discovered, adding to his humiliation. Distraught at the apparent waste of training time, McQueen rages at Cruz and in the process accidentally breaks her trophy. Cruz reveals that she had wanted to be a racer just like McQueen all her life, but never started a race due to her feeling intimidated and outclassed by the other racers. She resigns as McQueen's trainer and heads back to the training center.
Guilty and with no other options, McQueen calls his friend Mater for advice. He suggests that McQueen track down Doc's mentor Smokey, in Doc's hometown of Thomasville, Georgia, so McQueen catches up to Cruz and convinces her to rejoin him. In Thomasville, McQueen meets up with Smokey, who reveals that despite the fact Doc never raced again, he found new happiness in training McQueen. After McQueen accepts that he will never be as fast as Storm, Smokey and his friends help McQueen learn new tricks to overcome his speed disadvantage, using Cruz as his sparring partner. However, during the final practice race, Cruz suddenly overtakes him and he suffers a flashback to his crash, shaking his confidence.