Hydrogen is one of the most expensive ways of powering a car. See:
http://media.popularmechanics.com/documents/Fuel_of_the_Future-e852.pdf
Even if it weren't expensive, it has other problems such as the safety and size of tanks needed for vehicles. That said, however, hydrogen could be produced cheaply if we got over our taboos of nuke plants.
"Hydrogen is one of the most expensive ways of powering a car"
The physics of the electrolysis of water cannot be overcome.
But the economics of large-scale production of hydrogen might be. In March of this year GE announced a price-breakthrough in electrolysis of water into hydrogen.
http://www.technologyreview.com/read_article.aspx?id=16523&ch=biztech
Prediction is for a hydrogen cost equivalent to $3/gal gasoline