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.
Sorry I should have done a bit more research before posting ... yes it appears that the official line on lightning is that it's digital only, but there are conflicting empirical accounts [0]
Since my 5s still has a headphones jack there is certainly still a DAC there.
It could well be down to the fact that my car stereo has a better DAC on the USB line than it does on the bluetooth line. Or simply an older bluetooth audio standard as you suggest. Actually this is probably the most likely suspect!
Which I think all serves to underline how digital output is not "open and shut" when it comes to sound quality.
Thanks for the additional technical context on why they might be eliminating analogue signal altogether. I'd felt a similar rationale informed their refusal to include a FM receiver from the beginning.
It does make sense from many different perspectives for apple to make this "not their problem". I kind of feel it's a pity from a customer/functional perspective though.
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.