Peterhansel, the Dakar's most successful competitor with nine titles and 51 stage wins, endured an engine fire when the race resumed from Mendoza, Argentina. The Frenchman put that out and carried on, but then had to stop with an overheated engine. Soon after, his Mitsubishi Lancer broke down and he had to be towed home.
His withdrawal at the halfway point in his 20th Dakar, while running fourth overall, left Mitsubishi's chances of an eighth consecutive victory severely dimmed. Peterhansel's exit followed teammates Hiroshi Masuoka and Luc Alphand -- who'd won the last six Dakars between them -- and gave Volkswagen a shot at its first title since the second rally in 1980.
Sainz leads Volkswagen's dominance in the general classification after his third stage win on the shortened 151-mile special.
After starting in sand dunes, climbing to 9,800 feet, and finishing with a muddy run into Valparaiso, Chile, former world champion Sainz beat teammate Mark Miller of the United States by 3 minutes, 41 seconds. NASCAR driver Robby Gordon was third in his Hummer, 4:13 back. Overnight leader Giniel De Villiers of South Africa was sixth.
Overall, VWs had the top three placings, with Spain's Sainz 9 seconds ahead of De Villiers, and 13:53 up on Miller.
Nani Roma of Spain, fourth in the stage and overall, vowed to push the VWs all the way as their last main Mitsubishi rival.
"If VW want to win the rally then it's going to be tough because I'm not going to let up," Roma said.
Francisco Lopez, a former 450cc world champion, pleased his Chile countrymen by winning the motorbike leg for his first stage victory.
Overall leader Marc Coma of Spain was second in, and widened his lead to more than 51 minutes over American Jonah Street, who was eighth on the stage. Defending champion Cyril Despres of France was third on Friday and dropped to sixth overall, more than 90 minutes behind 2006 champion Coma.
Saturday will be the first rest day of the rally.
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