What is the ruling on hanging a necklace inscribed with "Ya Muhammad" around the neck or in a car?

It is not permissible to engrave "Ya Muhammad" on a necklace, because it is a supplication to other than Allah, which is polytheism (shirk). Ignorant people might wear it, believing it brings benefit or repels harm, which is also polytheism. The rights of the Prophet, peace and blessings of Allah be upon him, are not fulfilled merely by hanging his name, but by obeying him, following his Sunnah, and defending him.