Water isn't cheap.
Can I point out that most countries in the world have water issues. Those that don't are too busy educating their citizens about treating disgusting diseases, by not drinking sewerage water running down the street, to worry about fixing their water issues:p
Australia has water shortages about 80% of the time.
China doesn't have drinkable water. Except that which is imported in bottles.
European men are turning into nancy boys, thanks to the water being repeatedly filtered through the hormone riddled kidneys of women popping birth control pills.
At the moment, I think water comes in about $1 a litre from a bottle (retail).
That's about 2/3 the price of fuel atm. Once every car on the road starts using water, the price is gonna sky rocket, not to mention the water shortage issues. And yes I know that when you break water into hydrogen & oxygen & make it go bang, it goes back to water .. but someone'll find a new way to ensure wastage.
Besides, oil companies aren't gonna let that sort of technology out of the bag. The scientist will either sell the patents to the oil companies, or the oil companies will give him a burlap bag, a few bricks and a nice waterfront view .. for a few seconds.
To top it off, Hydrogen is rather .. um ... volatile .. and tends to explode at the drop of a Hat .. literally. INSANEHAT!
To top it off, the energy required to convert water into it's chemical constituents is tremendous. You won't be helping the environment by plugging in your water car, so it can refuel overnight. The electricity from the grid is mostly generated from fossil fuels anyway, except in places where the residents have a healthy green glow at night