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I don't know about water, but they are experimenting with hydrogen and what it gives off is water, they already have concept cars they are evaluating there performance.
Was intrigued by the question and did a little internet research. After hours finally found a site that actually had plans on how to make the system yourself and was requesting feedback as to how it worked "for you".
As with anything there is a right way and a wrong way to do anything and they have recommendations on the "right" way. That pretty much turned me off of the idea due to the fact that for it to work "longterm" they state that you should get your pistons ceramic coated as well as the inside of your intake manifold, replace your valves with stainless steel valves, and to let your exhaust system rust off and then replace it with stainless steel because they state that it will start rusting almost immediately because of the moisture dispelled. They also don't recommend that you do this to your daily driver.
Also be aware that advertisers (I won't call them liars, lol) will always give you best case scenario with claims like a 40% increase. Most sites that are not trying to sell you something state to expect more like 10-20% depending on the condition and tuning of your engine. This even sounds impressive until you do the math. Let say you have a vehicle that gets 20MPG and you are getting 20%. A 4MPG increase which is significant. A 15 gallon tank is giving you a savings of 60 miles or a little less then 2 gallons per tank which at $4 per gallon is about a $7 savings. Now figure the cost of the equipment to build the system (about $35 if you are good at building things and electrical) plus the cost of gauges to monitor it (there were 3 of them and can't quite remember all of them exept one monitoring cylinder head temp as brown gas burns very hot) and you are out maybe $100 on the cheap side. Now figure in the cost of just replacing the exhaust system and perhaps lessening your engine life. Even with gas near $4 a gallon you are talking quite a few tanks full of fuel to get payback and your engine is rusting if you go whole hog with all the recommendations you might just as well go out buy a hybrid.
This was the only website that I could find where the guy had nothing to gain so I tend to add a bit of credence to his analysis as well as a few other articles dispelling some of the myths about this modification but without plans or a how-to on how to build the device. This guy generally wanted you to do this and let him know your results. Maybe he is thinking about marketing his system and needs test results.
So to make a long story short I have abandoned any ideas to do it but not trying to discourage anyone else so if you do it, definately post the results. This is not new technology and contrary to popular belief, be assured that if it was that easy and with no drawbacks ALL of your major auto makers would have been doing this years ago.
Does anyone have info on so-called water fueled hybrid vehicles? Is it actually possible to run a car using water for fuel?
There are ways of converting water into energy, but it is not as simple as putting water into a gas tank and expecting the car to run. Water is not combustible, therefore it could never be used easily as fuel for a car. I don't think that water will ever be used to power a car, because it would require such a complex system to turn it into usable fuel. I just don't see how it would ever be practical, or for that matter even be possible to use it to power a car. PIPE DREAM as they say.
To expound on this: It does not actually burn the water it uses a device that removes the 1 part oxygen leaving a hydrogen gas that is injected into the fuel stream. In this form it is referred to as brown gas. It also needs to retain a moisture content because one of the functions of fuel is to cool the combustion chamber as well as provide fuel. Because brown gas burns hotter the moisture content is what does the cooling function (as I understand it). They have race cars that use a very, very high compression ratios for maximum power but can not avoid detonation even with race fuel so they use water injection. The only purpose of the water is to cool the combustion chamber to prevent detonation.