Well, hydrogen is hard to stock in large enough quantities to power a car. And is highly explosive too.
Ooh, ooh, I read all about hydrogen! The problem is that producing it is a bit of a pain, and so is storing it and transporting it. But there was an entire chapter in a book about what we have now and a lot of it is pretty neat! There's a pretty big movement in chemistry to find catalysts that can break down water into hydrogen and oxygen at low or room temperatures, and I think we've made a few that are
looking pretty good at this time. Actually, there are lots of ways to get it, and there have been similarly wacky schemes to produce it with bacteria (not sure if this is suitably dwarfy or not, but if I remember right there's some kind of bacteria-driven pyrite refinery in Australia).
There are also some crystals that can fit hydrogen inside and release it when heated, but most of them are expensive (like palladium, which has a spot price of about $700 US right now). Finding a cheap alloy that works as well is another pretty big Science Quest. Shipping will stay a problem, but since these materials can hold hydrogen at greater concentration without any pressure, a car off the tracks would probably just tip over and leak a bit (possibly burning) without a giant pressurized-hydrogen explosion.
Anyway, I'm pretty optimistic that we'll work something out with hydrogen eventually, because it looks like we're getting close to cheap production and storage. Distributing and getting it into use is a different story, but the science side of it is doing well.