Mike and KITT speed through the desert, as Torres lectures them not to underestimate their targets, Johnny and Ian Chang. Mike is to use his old friend from Iraq, bartender Sean Owens, to get close to the brothers, and then figure out how they're smuggling U.S. military technology overseas.
KITT pulls into the Halfway House Raceway Tavern and accesses security cameras as Mike greets Sean. Mike claims he's racing again and Sean promises to hook him up with a team. KITT alerts Mike to the presence of Ian's hot girlfriend Celine. Deciding to work a different angle, Mike asks KITT to tell him everything about Celine, and then moves in to charm her.
Ian strides through the bar and grabs Celine angrily, then starts a fight. Mike offers to settle the matter with a car race. Johnny claims the brothers only race for pink slips. Sean tries to talk Mike out of it, but Mike knows he needs to gain street cred to get in with the top dog, confusing KITT. Celine takes off her top and uses it as a flag to start the race.
Ian drives dirty, causing KITT to fall behind. Mike orders KITT to transform into Attack Mode, risking exposure. When they catch up, Ian starts driving irrationally, making impact with an oncoming minivan unavoidable. Mike jumps the minivan, and then orders KITT to transform in mid-air, despite the risk to his structural integrity.
Mike and KITT win the race, but KITT starts smoking, and goes offline. Chang crashes his Lamborghini at the finish, and the car explodes seconds after it comes to a halt. Back at HQ, Sarah scolds Mike for transforming KITT in mid-air. Mike defends himself - he was undercover. Zoe jests that in a few more minutes, he would have been under the covers with Celine...
Torres provides a mission update. Last night, the NSA intercepted coded transmissions to a Chinese satellite sent via next generation U.S. military equipment. Torres thinks that the Chang brothers' custom car import business is a front for the smuggling operation, but they still need to find the source. It's vital to national security.
Johnny lays into Ian for wrecking the car they were supposed to deliver - how could he have lost the race? Ian swears that Mike switched cars, but Mike shows up to pooh-pooh that theory and offer an exchange. Instead of a pink slip, the brothers can sponsor him as a driver. Johnny scoffs, asking Mike if he'll be driving his fried Mustang. Sarah screeches up in KITT, explaining that she's the mechanic. Charmed, Johnny tells Mike to come back later to talk.
That night, Mike and Sarah return to the bar. When Mike goes off in search of Johnny, Sarah asks Sean about his friendship with Mike, since they trained for the army together. Sean admits his hopes for his own life have diminished after spending two years in prison for fencing stolen property. He doesn't want to see Mike make the same mistakes he did.
Celine apologizes to Mike for the race, but her bruised arm suggests that she got the worst of it. KITT warns Mike that Ian is approaching with a knife, so Mike quickly tosses him aside. Johnny aims a pistol at Mike, accepting his offer on one condition - Mike has to get him a car exactly like the one Ian wrecked by tomorrow midnight.
Sarah updates KITT's screen surface technology. Billy brings up the only other car identical to Ian's Lamborghini on the west coast, owned by Dmitri Kasporov, a.k.a. the Ukrainian Hugh Hefner. Torres warns Mike that he's on his own if he gets nailed for grand theft auto. Sarah decides to steal the car from Kasparov's "Models and Bottles" bikini party. Mike doesn't like this plan, but has to admit, Sarah looks better than him in a bikini.
Sean warns Mike to stay away from Johnny's crew. If he loses the race, they'll kill him. Nevertheless, Sean's got his back. On the way to the bikini party, Sarah has KITT make her a key to the Lamborghini, and print a ticket. She stuns Mike as she gets into character, rocking out to her favorite song. After all, stealing a car is on her bucket list, and she's going to enjoy it.
Once inside the party, Sarah activates her sunglasses video link, allowing KITT and Mike to check out the hotties. Distracted, Mike guides Sarah to the garage, but neglects to tell her that Kasporov is there. When he gets touchy, she punches him out and steals the car, escaping under a hail of gun fire.
Back at the bar, the tattoo on Mike's arm comes into contact with KITT's surface screen, which begins spewing documents. KITT can't identify the data, so Mike surmises it must be his own top secret files. Just then, Johnny walks up, so Sarah hurls Mike on top of KITT's screen, jumps in his lap and kisses him passionately. When they finally get up, Mike's files have disappeared. Stunned, he throws Johnny the key for the stolen Lamborghini.
Back at HQ, Billy catches Mike trying to scan his tattoo on KITT's hood. KITT detects nothing irregular - it's just a tattoo. After discovering that KITT's recent memory has been wiped, Mike confronts Torres, who disavows all knowledge, but promises to look into it. Mike tells Torres that he set up a race with Johnny, the perfect opportunity for the smugglers to make their transfer. Furious over the car heist, Dr. Graiman lays into Mike, who covers for Sarah, claiming it was his idea.
On the way to the race, Sarah asks Mike if Sean could be the top dog in the smuggling ring, considering his past and the large cash deposits he's been making recently. Mike defends his friend, claiming what's past is past. Johnny tells Mike that he has 200 large riding on the race, so he better win. As Celine holds up the checkered flag, Sarah spies Ian shaking hands with a bald guy - the transfer is happening.
KITT identifies the bald guy as Robert Bellows, a top secret weapons designer. Sarah spies the guys building the smuggled technology into the GPS of several cars before Ian catches her and the sunglasses video link is cut off. Mike abandons his lead in the race and heads back to the garage for Sarah.
Mike punches out Ian and demands to know who Johnny works for, as Sarah makes a beeline for KITT. Mike is just checking out the cars when Johnny knocks him out from behind. When Mike wakes up, he's buried up his neck in the desert. Ian and Johnny chuckle and rev their go carts.
KITT can't locate Mike so Sarah asks Sean to help. He's amazed when she orders KITT to transform into 4X4 mode to gain velocity over the desert terrain. Sarah digs wildly to free Mike as Sean holds the brothers off with his rifle. When Mike is finally free, Sean busts Sarah in the face, and demands that Mike shut down KITT or he'll kill her.
Bellows affixes a next generation EMP to KITT's hood, reducing his power to almost nil. The folks at HQ race to locate KITT's signal as Sean explains that he's owed this money - after all, he did two years "inside for them." After ordering the brothers to send KITT to the Port of LA and dig a hole for Sarah, Sean races into the desert, leaving Mike chained up.
Billy locates KITT and helps him power up. KITT lasers off Mike's chain so he can beat on Ian. Spraying bullets, Johnny kills Ian. KITT comes back online to fry Mike's chain with a laser, enabling him to take down Johnny. Mike and Sarah climb in KITT and race after Sean, who doesn't know he's about to drive over the edge of a cliff...
Torres reports that the stolen vehicles and smuggled military technology were recovered at the Port of LA. Mike asks about his tattoo, and Torres explains it was an anomaly that shouldn't happen again. Mike settles into the driver's seat to watch a John Wayne movie with KITT. He's troubled by the loss of his friend. KITT offers the consolation of his friendship. Mike figures why not; every cowboy needs a sidekick. KITT jokes that Mike shouldn't sell himself short... he's much more than just a horse.