And when the engine is hot, the H2O is evaporated long before it reaches the tailpipe. In the morning, the water reaches the end of the cool exhaust system, and some drips out. This is why it is so important to drive your car. For short stop and go driving, that water never gets boiled off. Your exhaust system ends up sitting full of moisture.
This also applies to your crankcase. Upon start-up, there is moisture inside. As you drive and get the oil and metal nice and hot, that moisture is burned off. Short trips don't get rid of that moisture, and then it contaminates your oil and cause premature wear. Also, there are byproducts of combustion that also burn off when the car is driven to the point where it is hot.
1998 C230 "Black Betty"