The film opens where its predecessor left off. Mike flees from Boulton mortuary in the hearse, while Reggie is trapped inside by The Tall Man's spheres. Rather than kill Reggie, The Tall Man lets him go, saying he is doing so "to play one last game", then The Tall Man leaves Boulton.
Mike's brother Jody, now a steel sphere that can occasionally resume its human form, persuades a reluctant Reggie to go looking for Mike. On the way, Reggie is attacked by a mysterious psychopathic demon disguised as a police officer. Reggie escapes only after shooting, stabbing, and immolating the demon. Later, Reggie rescues a woman named Jennifer from her overturned car and takes her to the next town. They stay the night at an abandoned motel where Reggie tells her the story of The Tall Man. A disbelieving Jennifer rejects his advances before Reggie falls asleep and dreams of Mike. Disturbed, Reggie seeks solace from Jennifer and discovers she has two spheres where her breasts should be. The spheres attack Reggie, who manages to destroy one with a sledgehammer but is pinned to the wall by the other. In desperation he strikes his tuning fork and the sphere explodes. Reggie then dispatches the demon Jennifer with the sledgehammer before leaving.
Mike, trying to uncover the mysteries of The Tall Man in order to escape his transformation, drives through abandoned towns and remembers the last days of his youth before The Tall Man's arrival. The Tall Man appears in the back of the car, assumes control of the automobile, and disappears into a coffin. Mike drives the hearse into Death Valley, where he writes a last testament, in which he expresses his intent to force The Tall Man into a "final" confrontation. After the Tall Man interrupts his attempted suicide, Mike passes through a space gate and arrives inside a 19th-century, colonial-style house. Outside the house, he meets someone resembling The Tall Man; however, the man is kind and welcomes him cordially, introducing himself as Jebediah Morningside. The man tries to speak to a frightened Mike who flees back through the gate.
Back in Death Valley, Mike realizes that he can move rocks with the power of his mind. Jody appears, but a distrustful Mike accuses his brother of having abandoned him. After defending his behavior, Jody disappears. Mike begins working on the hearse's engine, seemingly using parts to build a makeshift sphere. Theorizing that Jebediah must somehow become The Tall Man after traveling through the space gate, Mike plans to prevent Jebediah's first journey. Mike goes through a gate, but finds himself in a deserted city and escapes The Tall Man only with Jody's help.
Meanwhile, Reggie arrives at Death Valley and fights off a group of zombie dwarves shortly before Mike and Jody reappear through a gate. Mike embraces Reggie and tells him not to trust Jody. Taking the tuning fork from Reggie, Mike and Jody pass through the gate and appear in Jebediah's house. Invisible to the old man, they witness how he perfects his craft and approaches the inter-dimensional gate. Mike unsuccessfully tries to stab Jebediah, who vanishes and moments later is replaced by the evil Tall Man who emerges in his place. The Tall Man can see Jody and Mike, forcing Mike to escape through the gate.
Jody finds Mike in a cemetery and attacks him. Awakening on a mortuary slab, Mike uses the tuning fork to immobilize Jody and the Tall Man as they attempt to saw his head open. He kills Jody with the sphere he built. The Tall Man quickly revives and telekinetically takes the fork from Mike. Again, Mike escapes through the gate back to Death Valley, this time pursued by his nemesis.
Reggie tries to shoot but is overpowered by The Tall Man. Mike then summons the sphere he built and uses it to impale The Tall Man in the neck. Amused by what he calls Mike's "toy", The Tall Man is momentarily distracted. At this moment, Mike activates the hearse's motor, which turns out to be the true weapon, a strange inter-dimensional bomb, against the Tall Man. The Tall Man is once again supposedly vanquished after the explosion consumes both him and the car. However, a new Tall Man immediately comes through the gate, revealing that The Tall Man is but one of many. Resuming the surgery started by his predecessor, The Tall Man removes the golden sphere from Mike's head and then passes through the gate.
Reggie arms himself and chases after The Tall Man through the gate. Close to death, Mike recalls a childhood memory of him climbing into Reggie's ice cream truck as they both drive off into the dark night.
Why kind of engine does Mike work on?
Hearse