Car is connected to the phone wirelessly (hotspot). The car sees that it's on wireless and that is enough for TIDAL to stream in "HIFi" quality, which is a lot higher bitrate & better SQ than standard.
In purely audiophile terms it is probably nothing to shout about, but to my ears it is night and day better than Spotify over LTE (or wireless). It is a big enough difference to make me inclined to hotspot my phone every time I get in the car, even though I already have Premium Connectivity and thus don't need to.
Incidentally, there is no way that I know of to share the internet connection over Bluetooth (like a Mac would). It's all done over wireless. The phone broadcasts a wireless signal, the car connects to it and is none the wiser that it is not a static network and is unreliable. The wireless connection to the phone will be rock solid, but the phone's mobile connection that it uses to actually get data will be variable as you'd expect.