Attempts are being made since 20th century to make a more environment friendly car which will reduce both fuel cost and fuel consumption to a considerable degree. Nothing however, has yet been done on a level that can make such transportation available in market for the masses.
Jumping on your question directly, a water powered car works on the process of electrolysis –a process which splits water into its constituent elements, Oxygen and Hydrogen.
2H2O → 2H2 + O2
But this is only a superficial way of seeing things. Had it been that simple, the water powered cars would have launched by now, hitting the sales and purchase bar like anything.
Despite all the efforts that Renault made of launching electric and hybrid cars in collaboration with multiple countries, no effort of coming up with a fuel-efficient and environment-friendly car has been successful.
Here’s how the working of a water-powered car goes beyond the process of electrolysis:
First thing that needs to be kept in mind is that any car just can’t run alone on water. Water cannot be the only fuel on which a car runs. That is possible only through the conjunction of water and gasoline.
Apart from this, many researchers have argued that the amount of energy required to split water into its constituent elements would require as much energy as a regular combustion engine. The claims are even that the fuel efficiency of the engine of the car will go down, instead of improving with this process.
Here's how a water powered car exactly works:
The conversion kit that needs to be installed for water
powered car, is to play the role of an electrolyzer. The reaction taking place, will be supported by batteries or alternators of the car which can lead to a variety of problems.
Anyhow, after this process, the resultant Hydrogen
and Oxygen molecules are injected into the engine where they get mixed with gasoline, thus forming the Brown Gas or Oxyhydrogen. When mixed with gasoline and air in the engine, the fuel has less emissions and more energy as the main fuel here is hydrogen and not gasoline.
The amount of energy produced is somewhat more than the energy actually needed by the engine of the car. So the extra energy is used up further for the process of electrolysis.