This is the optional extra Surprise Drive and it should be accompanied by the car making a sort 'Oh' sound! What a bizarre fault. No idea save to check the linkage on the selector assembly.
Many of these small cars have a axle transfer box which has a gear for forward and chain drive for reverse. A dog selector shuttles between.
Messerschmitts KR175, 200, 201, TG500, Goggo Darts, Heinkel 175, Vellam Isetta, Fiat Jolly, Peels, Bamby, AC Mk12C & Type 70, Velorex, Church Pod 1, Reliant Mk5
MG ZB Varitone, Wolseley 4/44, Borgwards, Saab 96s, Bellamy trials, Isuzu Trooper, Citroen BX 14E, 16TRS Auto, 17TZD Est & Sal, GTI 16V.