Motivated by recent simulations and by experiments on aggregation of gliding bacteria, we study a model of the collective dynamics of self-propelled hard rods on a substrate in two dimensions. The rods have finite size, interact via excluded volume, and their dynamics is overdamped by the interaction with the substrate. Starting from a microscopic model with nonthermal noise sources, a continuum description of the system is derived. The hydrodynamic equations are then used to characterize the possible steady states of the systems and their stability as a function of the particles packing fraction and the speed of self-propulsion.