A quiet road near the village of North Arm Cove in Port Stephens turned into an alleged crime scene on Friday after a woman and teenage girl were injured when a car allegedly lost control and hit a power pole.

Police were told the white sedan had been doing a burnout when it crashed and burst into flames at the intersection Gooreengi Road and Somerset Avenue at about 11.40pm.

The driver allegedly fled and the injured woman and teenager were rushed to John Hunter Hospital in nearby Newcastle.

A 22-year-old man was arrested on Monday and is expected to front Raymond Terrace Local Court in May on a string of charges stemming from the alleged incident, after he was granted bail.

North Arm Cove Community Association president Bob Reid revealed residents of the small town had held grave fears about the hooning hotspot for six months.

He said he had raised concerns with MidCoast Council multiple times since August last year and had made police reports, about the late-night meet-ups he said seemed to occur at least monthly at the intersection.

"They are a major safety issue, for both residents driving through the centre of it to get home, and for the burnout participants and observers," he told the Newcastle Herald.

"It was only a matter of time before someone - a participant, a bystander, or a resident - was injured from these events."

Mr Reid said locals had reported up to 100 people - including children - could gather at the site to watch drivers perform burnouts. It is unknown how many spectators were present on Friday.

Photographs of the intersection show black tyre marks snaking across the roadway and debris scattered.

Images taken in January show damaged tyres along the edge of the road.

Mr Reid said smoking or burning tyres were a bushfire hazard because of the thick, dry vegetation nearby, and that debris like wire could damage other cars on the road or cause an accident.

He said residents reported feeling fearful or intimidated trying to navigate through a meet-up at night just to get home.

Mr Reid said the intersection was an attractive location for burnouts because one of the roads was the old highway, so was wide.

"We have been asking for police patrols, traffic engineering solutions and video surveillance," he said.

Mr Reid claimed MidCoast Council told him five weeks ago that it would take action to make the intersection unsuitable for burnouts but gave no timeframe.

He said he hoped that even temporary measures could be put in place as soon as possible.

The Herald has sought comment from MidCoast Council on its plans.

Mr Reid said he was "shocked" when he heard about the incident on Friday night, and said the committee hoped the two people that were injured fully recovered from their injuries.

A Hunter New England Health spokesperson confirmed a 20-year-old woman's condition had improved to stable over the weekend. No further details have been released about the 14-year-old due to privacy.

Port Stephens Hunter police were called to Somerset Avenue on Friday night and allege a white Ford Falcon sedan had been performing burnouts in front of a crowd when the driver lost control and slammed into a powerpole.

The car struck the woman and teenager standing next to it before erupting in flames, and the driver fled the scene, according to detectives.

Fire and Rescue NSW crews extinguished the car fire and the Ford was seized by police for forensic testing.

Specialist officers from the Crash Investigation Unit were called in to comb the scene.

Port Stephens Manning Highway Patrol's Fatih Samsa told the Herald police urged the community to report illegal activity to Crime Stoppers and local police, which helps officers focus resources and efforts into key areas.

"Officers across the district continue to target and stop road users who drive in a dangerous manner, particularly in known hotspot areas," he said.

"Dangerous driving won't be tolerated by NSW Police. Drivers doing the wrong thing are in our sights and can expect to face significant penalties."