WATCH extended one-hour highlights from every stage of the 2022 Dakar Rally - January 2-15 (AEDT) - EXCLUSIVE and FREE on SBS and .
Sanders, who had won three stages of the race in Saudi Arabia and was lying third overall, was on the way to Riyadh for the start of the 402km seventh stage on Sunday when he injured his left arm in a fall from his KTM 450.
Race officials reported that he had to be taken to hospital and that his race was over. There was no further information about the extent of the injury.
It was a bitterly disappointing end to what had been an exciting and largely successful adventure for 27-year-old Victorian "Chucky", who had gone into the rest day on Saturday believing he was in the form to take victory in just his second attempt at the celebrated race.
Sanders had won the prologue, the opening stage as well as Friday's truncated stage - the last before the rest day - and was only five minutes 35 seconds down on British race leader Sam Sunderland, his GasGas teammate.
Going into the second week of action that ends in Jeddah on Friday, he looked to have the pace to become the first Australian winner in the race since Toby Price took the second of his motorbike crowns in 2019.
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Sanders' absence now puts Australian hopes back on the shoulders of 34-year-old Red Bull KTM rider Price, who finished ninth in Sunday's stage and is 11th overall, just under half an hour behind the new leader, France's Adrien Van Beveren.
Van Beveren took advantage of leader Sunderland's off-day after the rest day leader finished almost 26 minutes down.
"It was a bit of a rough day. It started out bad for Sanders with a crash in the liaison and then the stage was really, really difficult with the navigation," said Sunderland.
Meanwhile, Molly Taylor, the first Australian woman to race in Dakar, and her co-driving compatriot Dale Moscatt finished 14th on the stage in the SSV category for four-wheel side-by-side vehicles and are currently 12th overall.
Nasser Al Attiyah remained well in the lead of the cars' race as nine-time world rally champion Sebastien Loeb moved back into second overall with a stage victory ahead of the Qatari.