The show opens with Chitty's history, when she was a racing car. The crowd is cheering as Chitty (then named Panther) races for her glory. Suddenly there is a crash and Chitty's racing days are over, and she is left to rust in an old junk yard.
In the present, Jeremy and Jemima Potts are playing in Chitty. Coggins, the owner of the yard and Chitty, tells the children that he must sell Chitty. They are upset by this and tell him that their father will buy Chitty, saying he has 'pots of money!'. At this moment, Truly Scrumptious arrives as she's having trouble with her motorbike. Seeing the children, and concerned about them not being in school, she insists upon driving them home to their 'castle', which Jemima insists is just a 'windmill'.
Upon arriving home, we find Jemima and Jeremy's father Caractacus Potts, who has just finished fixing the food making machine. After meeting Caractacus, Truly confronts him about his truant children and being a bad father. Then Truly notices the Sweet Machine and Caractacus shows it off to her, showing her a sweet he'd made. Unfortunately the sweet has a problem, it has holes in it! An argument ensues which ends with Caractacus throwing Truly out...but he has to admit to his children that she is pretty.
Now it is Tea Time, so Caractacus and the children sing You Two as Caractacus prepares tea (with help from the food making machine). During tea Jeremy and Jemima tell Caractacus and Grandpa about the car and how they told Coggins that their daddy would buy it for 40 shillings. Caractacus can't say no to his children, so he agrees to buy the car.
Later, Grandpa tries out Caractacus' sweet with holes, and discovers it whistles! Caractacus decides to take his 'sweet that whistles' to the Scrumptios Sweet Factory, and sell it to Lord Scrumptious. But, Caractacus isn't allowed entry into the factory to see Lord Scrumptious. At this moment, Truly arrives. When Caractacus realizes Truly is Lord Scrumptious' daughter, he tries to leave. But Truly insists upon knowing why he is there, so he shows her the sweet that whistles. She is delighted with it and insists he demonstrate it to her father (Toot Sweets). Lord Scrumptious is won over, but all ends in disaster as the toot of the sweets lures dogs into the factory where they cause havoc! Caractacus is thrown out of the factory.
Meanwhile, the Baron and Baroness of Vulgaria have sent their spies, Boris and Goran to find Chitty and bring her back to Vulgaria. Boris and Goran tell themselves they must act English but remember to 'Think Vulgar'.
Later that night, Caractacus puts his children to bed, singing the lullaby Hushabye Mountain to them. He is contemplative...having agreed to buy the car for the children, Caractacus must come up with the money. He decides to take his hair cutting machine to the fun fair to raise the money. Upon arrival at the fun fair, performers and acrobats sing Come To The Funfair, a lavish and colourful display. With his hair cutting machine, Caractacus talks a leary Sid into having his hair cut. But something goes terribly wrong, and the machine starts to smoke! Sid has been left totally bald! Caractacus flees, with an angry Sid chasing him. Caractacus comes across some Morris Dancers, and decides to disguise himself as one of them to fool Sid (Me Ol' Bamboo). After this, Caractacus is cornered by Mr Matthews, a turkey farmer, who wants to buy his hair cutting machine...not for it's hair cutting potential, but because he can 'kill 'em, pluck 'em, cook 'em, all in one go!'. Caractacus sells his hair cutting machine to Mr Matthews for 40 shillings, just enough to buy the car!
A while later, Caractacus is busy fixing up Chitty in his workshop, while Grandpa, Jeremy and Jemima are up in the windmill. Grandpa regales the children with stories (Posh). The next morning, just as Truly arrives, Caractacus comes out of his workshop and announces that Chitty is finally finished and ready for her unveiling! As Chitty is raised into view, there are squeals of delight from the children...Chitty is beautiful! As Grandpa goes 'off to India', Caractacus, Chitty and the children decide to go for a picnic. Singing Chitty Chitty Bang Bang they head off to the beach.
At the beach, while Caractacus putters on the car, Truly and the children play with a beach ball (Truly Scrumptious). Afterwards, the children fall asleep in the car. As Caractacus and Truly apologise to one another for their earlier behaviour, and begin to become close, a storm suddenly breaks. They hop in the car and prepare to head for home, only to discover that the tide has come in and they are trapped by the rising water. Just as they are trying to free themselves from the water, they are shot at from an attacking Vulgarian ship in the distance. The ship is getting closer, and everyone is getting scared. They plead for Chitty to help them get away from the attacking ship. With this, a floating device begins to expand beneath Chitty, raising them from the rising water! They are able to escape from the Vulgarian ship!
Now, we see the Baron and Baroness in Vulgaria. The Baron receives a phone call from his spies, telling him they've lost the car. He also discovers that Caractacus has 2 children. Children are forbidden in Vulgaria, and the Baroness goes into hysterics at the mention of children. The Baron calls the evil Childcatcher to take care of the children.
At home, Grandpa is waiting for Caractacus and the children to come home. While waiting, he decides to take a trip to 'India'. While in India, a Vulgarian in a hot air balloon appears, and kidnaps Grandpa Potts, thinking he is Caractacus the inventor, who can make the Baron's car float on water!
Back in Vulgaria, the Baron is told that Caractacus Potts has been kidnapped and is on his way to Vulgaria. He is thrilled that Potts the inventor will be able to make his car float and fly!
Caractacus, Truly and the children arrive home to find Grandpa being kidnapped. They hurry back to Chitty to chase after Grandpa and rescue him. But as they drive, they find themselves quickly approaching a cliff, about to go over! As they yell, and plead with Chitty to help them, Chitty suddenly starts to change, and huge wings appear! Chitty can fly! Caractacus, Truly and the children are saved, and fly off to Vulgaria to save Grandpa.
Act Two opens in Vulgaria, with Baron Bomburst's soldiers and servants singing the Vulgarian National Anthem. With all the pomp and circumstance, Grandpa Potts arrives in 'India', reading his newspaper. He is escorted out to meet the Baron and Baroness, where he discovers that the Baron has mistaken him for his son. To save himself from being turned into a sausage, Grandpa Potts agrees to make the Baron's car float and fly!
Grandpa is then taken to meet the Inventors, who will assist him with the Baron's car. Grandpa is discouraged and feels all is hopeless, but the Inventors give him a pep talk (The Roses Of Success). But things go wrong as they are working on the car, and the Baron's car explodes in a pile of smoke. The Inventors try to hide this, but the Baron sees, and gives Grandpa and the Inventors one more chance to fix his car, or they'll all end up sausages! At this, Caractacus, Truly, Jeremy and Jemima are spotted in Chitty, and the soldiers and spies are sent to find them. The Childcatcher is also sent to capture the children.
Caractacus, Truly and the children arrive in town, but are surprised to find no one around. As they are talking, the town Toymaker arrives, and takes them into his toyshop. He explains to them that children are forbidden in Vulgaria, and that the children must be kept hidden. Caractacus convinces the Toymaker to help him rescue Grandpa, and Truly and the children are left alone in the toyshop. Suddenly, a man dressed as the Toymaker appears from the place where the Toymaker and Caractacus have left, and informs Truly that Caractacus wants her to join him, and that he'll take care of the children. Truly leaves, and the man reveals himself to the children...he is the evil Childcatcher, come to take the children away to the castle! Truly comes back to the toyshop to see the children being taken away, then rushes to find Caractacus to tell him what has happened.
Meanwhile, Caractacus and the Toymaker are underneath the castle, in the sewers. There, the Toymaker reveals the lost children of Vulgaria, hidden away from the evil Childcatcher. Caractacus is apalled and saddened by all this. Truly arrives and tells him what has happened to his children. He realizes he must save Grandpa, his children, as well as all the children of Vulgaria. He says to them all that they must work as a team to free the town from the Baron and Baroness, and the evil Childcatcher(Teamwork).
Meanwhile, back in the castle, the Baron and Baroness are preparing for the Baron's birthday party which is the next day. They tell of their love for one another (Chu Chi Face). The Baron is excited about his birthday party, and pleads with the Baroness to tell him what the theme of his birthday party is. She tells him it is a Brazilian theme! This leads us into the next day, where the exciting Bombie Samba is performed.
After the Bombie Samba, the Baron asks for his birthday present. The Toymaker then appears with 2 large boxes, and explains that in the first box is a doll, but 'no ordinary doll'. The box is then opened to reveal a life-size music box doll. The Toymaker turns the key and the beautiful doll begins to sing Doll On A Music Box. While the doll sings, the other box is opened to reveal a rag doll, who begins to sing Truly Scrumptious. The Baron is delighted by all this, and at the end he goes over to the rag doll. Suddenly the rag doll moves, and reveals that he is not a doll, but a person - Caractacus Potts! Mayhem ensues, with children suddenly appearing, and they all fight the soldiers. The Baron and Baroness are captured, and victory reigns.
Caractacus, Truly and the Toymaker quickly run to find Caractacus' children, but the Childcatcher follows. The children are found locked in a dungeon, and Caractacus is reunited with his children. However, they hear the Childcatcher following them, but there is no way out! Suddenly they hear Grandpa Potts singing Posh, then he enters the room. They are thrilled and the children rush to him. But he isn't Grandpa, he is the Childcatcher! The children fight him and he is overcome and captured. He is entrapped, and raised up through the roof, never to be seen again.
With this, they hear Chitty, and Grandpa breaks through with Chitty. The Baron and Baroness are run out of town, and the town has been given back to the people...everyone is free! Caractacus, Truly, Grandpa, Jeremy and Jemima are also free to go home. After saying their goodbyes to the people of Vulgaria, the group get in Chitty. Chitty's wings appear, and the family are raised into the air, waving goodbye as they sing Chitty Chitty Bang Bang!