So many questions, like where do baby cars come from? Do cars die of old age or just general engine failure? How do cars have the dexterity to make the structures we see, is this a post apocalypse and they are living in human ruins?
Technically yes, guess a better question would be do the cars even die at all? Or can they get "restored" and be like a zombie or resurrected, almost immortal if they keep getting fresh parts.
Baby cars come from the Automotive Industry. And all the machines in the factories have tongues like Lightning McQueen. I don't think they have a special hug for gene-exchange.
Cars die when enough of their parts fail they can no longer run. I can't speak for the brain and if there's a vitals power train or a battery to keep it alive outside the motor train. And the tongue doesn't make much sense.
It could be post-anthropic apocalypse. More likely it's a robust computer system simulating a universe according to the specifications of a five-year-old racecar enthusiast. It's irrelevant if the toddler is still five or even alive. It may be still running in the background of its more relevant processes (e.g. running a household or an automotive factory, or even commanding armies of terminator robots to hunt and annihilate the last remnants of humanity.)
In case you wanted some cosmic horror with your Pixar. Try not to think about the Scream Extractor.
If you're wondering how they eat and breathe, and other science facts (la la la) Just repeat to yourself "it's just a film, I should really just relax."