Notorious real estate mogul Alonzo A. Hawk is on the verge of realizing his grandest venture yet: the massive 130-story Hawk Plaza in San Francisco. However, his plans are thwarted by the last standing structure on the site—a historic firehouse from 1892, now the residence of Mrs. Steinmetz, the widow of its former owner and aunt to mechanic Tennessee Steinmetz. Despite his relentless attempts to evict her, Hawk's ambitions are stymied as the costs pile up at a staggering $80,000 a day. Enter Willoughby Whitfield, Hawk's lawyer nephew, who arrives to negotiate a settlement with Mrs. Steinmetz.
The moment Mrs. Steinmetz meets Willoughby, she feels a warm connection to his youthful charm and courteous manner, distinguishing him from Hawk's brutish associates. She introduces him to Herbie the Love Bug, currently in her care while his owner, Jim Douglas, focuses on racing abroad, and while Tennessee is on a spiritual journey to Tibet. The firehouse is also home to two other remarkable machines: an antique orchestrion that effortlessly plays its own tunes, and Old No. 22, a retired cable car brimming with life experiences.
As Willoughby becomes part of the quirky household, he encounters Nicole, a neighbor enraged by the destruction of her apartment at the hands of Hawk's crew. Her animosity is palpable, culminating in a punch to Willoughby's face. Yet, when she offers him a ride in Herbie, she seems to seek reconciliation as she invites him to witness a thrilling car-themed jousting contest. With Willoughby’s caustic remarks fueling Herbie, the car surprises everyone by dominating the competition.
Later, while enjoying seafood at Fisherman's Wharf, Nicole reveals shocking secrets about Hawk's underhanded dealings, including his demolition of a popular baseball location once cherished by Joe DiMaggio and his brothers. This ignites Willoughby's anger, and when he inadvertently discloses his familial connection to Hawk, Nicole reacts angrily by throwing a boiled lobster at him, causing him to tumble into the water. Struggling with the moral consequences of his uncle's actions, Willoughby vows to disassociate from Hawk. However, the remorseful Nicole and a frank conversation with his mother eventually convince him to ally with Nicole in opposition to their shared adversary.
As tensions grow between Hawk and Mrs. Steinmetz, Hawk, driven by his cunning, decides to steal Herbie. After successfully hotwiring the beloved car, his arrogance leads to chaos as Herbie takes matters into his own hands, creating traffic havoc in a series of clever escapes. Hawk's efforts to intimidate Herbie poorly backfire, resulting in his abandonment right at his own office.
Meanwhile, while escorting Mrs. Steinmetz to the market, Herbie navigates a dangerous chase against Hawk's henchmen. Demonstrating impeccable evasive maneuvers, he leads them through the historic Sheraton Palace Hotel and across the Golden Gate Bridge, with Mrs. Steinmetz blissfully ignorant of the frenzy around her.
Later, after Mrs. Steinmetz requests that Nicole and Willoughby gather more groceries, she proposes a peaceful drive to the beach. Enjoying the sun, Willoughby and Nicole's budding romance flourishes against a scenic backdrop, though Hawk keeps a watchful eye on their every move, aided by his chauffeur's surveillance.
When Hawk's henchmen trap Herbie during their getaway, he ingeniously resorts to surfing the coastal bay aboard a makeshift surfboard. Upon returning to the firehouse at night, the group discovers the remnants of their home have been pillaged by Hawk, leaving them frustrated and agitated.
Determined to reclaim their lost treasures, Mrs. Steinmetz, Willoughby, Nicole, and Herbie embark on a daring excursion to break into Hawk's warehouse. As they stealthily navigate through stacks of crates, Herbie masterfully ensnares Hawk's security guards, providing invaluable time for a successful getaway with Old No. 22.
The following morning, Mrs. Steinmetz resolves to confront her adversary with Willoughby at her side. Despite Nicole's warnings, Willoughby succumbs to the temptation of joining the fight as they take Herbie onto Hawk's skyscraper's window-cleaning apparatus. There, they overhear Hawk's conspiratorial discussions with Loostgarten, a demolition expert eager to raze the firehouse. In a fit of poetic justice, Mrs. Steinmetz activates the machine, deluging Hawk's office in soap and water. Herbie chases Hawk around the office and out onto the ledge, finally calming down amidst the uproar.
In a clever twist, Willoughby adopts Hawk's tone to mislead Loostgarten into thinking Hawk is plotting against his own home. The ruse works, resulting in an enraged Hawk sprinting down the street, blindsided by his own precarious situation.
In a moment of unintended irony, Hawk brokers a false peace with Mrs. Steinmetz, who is blissfully unaware of his duplicitous nature. While Willoughby and Nicole share an intimate dinner, Hawk arrives at the firehouse with a fleet of bulldozers bent on annihilating their cherished abode.
Left to fight against the tide of Hawk's men, Judson finds himself unarmed but grabs an old fire hose, which ultimately bursts under pressure when Herbie is absent. With no idea of the chaos unfolding at their home, Nicole and Willoughby remain oblivious.
Undeterred by his absence, Herbie rallies a brigade of sentient Volkswagen Beetles across the city—including a classic salvaged from a junkyard—to mount a daring rescue. These Beetles, motivated by their leader’s fear of Hawk, chase him down, sending his men scattering in disarray.
After narrowly escaping a police-pursued disaster, Hawk ends up being apprehended while recounting his outlandish tale of an army of Volkswagen Beetles on a mission against him. In the aftermath, Willoughby and Nicole solidify their bond by tying the knot, joyfully riding off into the sunset as Herbie, now with his Beetle companions, forms a celebratory archway—a testament to their enduring friendship.
