The motor in this car works by separating water into hydrogen and oxygen gas. These gases then combine in a reaction that generates energy, allowing the car to move. As the engine operates, it produces steam, making it environmentally friendly.—https://techstory.in/water-fueled-cars-a-revolutionary-break...

As per Mr W Biggar, the writer of the letter to thenational.scot, tap water was used to fill the tank of the allegedly water-powered car, and tap water is also what dripped out of the exhaust pipe (not necessarily the same amount).

techstory.in corroborates that the operational principle is in splitting H2O and then letting it recombine. It should come as no surprise that one of these steps, being inverses of each other, will be endothermic ('consume' energy) and the other, exothermic ('produce' energy, in the form of heat). Moreover, the second law of thermodynamics to my understanding means that if you first split water into hydrogen and oxygen, then let the two elements re-combine to make the heat do work, you've just down-cycled a potentially more useful source of energy (e.g. electricity needed to do electrolysis) into a less useful one, namely a relatively low temperature difference between parts of the engine that can be used to do work.

It would've been more efficient to put the electricity into a heating element to vaporize water instead of going through the extra steps that just lead to more dissipation of waste heat.

tl;dr Apocryphal story

Even the author doesn't believe it. Rather than focusing attention on the theoretical parameters of the seeming miracle of a petrol car converted to run on tap water (quashed by big oil ofc) the narrative weaves tedious political diatribe.