I'm pretty sure the lightning standard doesn't support an analogue signal at all, hence the role of the adapter as a DAC. Around 23mins in the linked video you see the part he's using inside the phone, and it seems more complex than simply matching pins.

In terms of your car stereo, I'd say that'd be an internal DAC, and the quality difference was simply down to a physical connection compared to Bluetooth(probably a previous standard too, the jump from Bluetooth 4.0 to Bluetooth 5.0/W1(as in AirPods) is pretty similar in magnitude to the jump from USB 2 to USB 3/Lighting(Lightning was again Apple adding support for modern features before the standard was finalised)). In the same way that nobody would've seriously dropped a dedicated display port before USB 3, the new Bluetooth standards are opening up audio to replace physical connections.

As I understand it, Apple ultimately ended up dropping the headphone jack due to interference(the DAC was being interfered with) from some internal components in the new design, as well as making waterproofing easier. I'm fairly certain there's no DAC already at this point.