Think this song is about mad, rabid, fire-breathing horses? Think again - it's really about automobiles and the air pollution they were generating back when this song was written (1972). Cars were running on leaded gas and they really were "smoking up the sky," especially in metropolitan areas like Los Angeles. Fortunately, now that most cars run on unleaded gas, air quality has noticeably improved. (Diesel engines are still a health hazard, unfortunately.)
Why horses? Because the term "horsepower" is used to measure the strength of piston engines, the kind that automobiles use. "Crazy horses all got riders and they're you and I" - riders = drivers and passengers.
Bottom line: This was a protest song against air pollution caused by car exhaust fumes.