The black and silver Subaru car in which they were travelling was severely damaged when it hit a metal streetlight side-on just after 8pm.
Witnesses told the Otago Daily Times the Subaru and another car overtook them as they were heading towards Andersons Bay.
"They just flew past us. They were drag racing. They were about a metre apart when they flew past us."
The black Subaru was in front and the witness saw the second, white, car change lanes and overtake the Subaru which responded by speeding up.
He estimated both cars were traveling at more than 100kmh.
The driver's side of the Subaru hit the pole and one of the first people on the scene found the driver on the back seat.
The passenger climbed out through the windscreen.
Police took him away in handcuffs and he was later charged with using offensive language towards ambulance staff.
After being helped out of the car, the driver, a 23-year-old Blenheim man, spent some time lying on the footpath, smoking, before being taken away in an ambulance.
Police said last night he had chest injuries.
Police are looking for a white Subaru stationwagon seen travelling "at speed".
