Some 23,000 cheap Chinese-made cars were Wednesday recalled in Australia after asbestos was found in their engines, with unions demanding to know how they came to be in the country.

Importer Ateco Automotive instructed all Chery and Great Wall dealers to stop selling affected vehicles, with the Australian Competition and Consumer Commission (ACCC) closely watching developments.

The asbestos was found bound in gaskets in the engine and exhaust systems.

"Asbestos is a prohibited hazardous substance and these engines and exhaust systems should only be worked on by qualified personnel using appropriate safety procedures," said ACCC deputy chair Delia Rickard.

"The ACCC will monitor the recall, and Workplace Health and Safety authorities will monitor the workplace safety issues."

The Australian Manufacturing Workers Union (AMWU) said it was unacceptable that the cars were allowed into Australia, which has banned the importation or use of asbestos since 2004.

"Asbestos kills people, it's that simple. It should not be in homes, construction material or cars," national secretary Paul Bastian said in a statement.

"If companies cannot guarantee that they do not have deadly substances in their vehicles, then simply they should not be able to import their products.

"We call on prosecutions to be served on anyone who imports asbestos into Australia."

The ACCC said customs officers detected the asbestos, which triggered a safety investigation that led to the cars being recalled.

Prolonged inhalation of asbestos fibers can cause serious illnesses, including malignant lung cancer.

Rickard said the automotive industry was experienced in managing the asbestos risk.

"The automotive service industry is experienced in managing this risk, as cars sold in Australia before 2004 often had gaskets that contained asbestos," she said.

"However, consumers and automotive repairers must be made aware that the risk may be present in these much newer vehicles."