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Police, fire and ambulance have all responded to the incident on Lake Esplanade, near the Ridges Hotel.
A police spokeswoman initially said one person was injured but this has since been updated to two, both with serious injuries.
A reporter on the scene said the car appeared to be a rental and two nearby parked cars had also sustained damage in the incident.
The road is closed to traffic in both directions and police are asking motorists to avoid the area if possible.
Lake Esplanade is the only route between central Queenstown and the suburb of Fernhill and Glenorchy.