Pop-Rock band Racing Cars formed in the Rhondda Valley, Wales in 1973. They signed to Chrysalis Records and released their debut album, Downtown Tonight in 1976. The record yielded this dream-like song, which reached #14 in the UK Singles Chart in 1977. Though Racing Cars failed to make any further chart appearances, the band was sufficiently established on the touring circuit to issue two further albums. These never reached the same commercial heights, and Racing Cars split up for the first time in the early 1980s. They subsequently reformed and released two more albums in the 21st century.
The song was inspired by the 1969 American film They Shoot Horses, Don't They? about a marathon dance-competition. Keyboard player Simon Davies recalled to Mojo magazine February 2011 that it, "was the perfect pop song at three minutes 45 seconds. The chorus had the perfect hook and I'm sure the success of the film helped tremendously. Even now, when it has airplay, presenters still associate it with the film and claim it was on the soundtrack - it never was."
Despite the song's commercial success, the band didn't see it as chart material. "'Horses' was the throwaway song on Downtown Tonight," recalled guitarist Graham Williams to Mojo, who thought of Racing Cars as an album band. "Our manager and the record company thought differently - one day during rehearsals our manager walked in and declared, 'I don't want to hear you in the pursuit of excellence, I just want you to give them something, to sing along to."'