The Hyundai driver was sitting fourth, 35.3s adrift of rally leader Toyota’s Sebastien Ogier, when he hit a compression that broke the front left suspension on his i20N during stage six.
Unable to repair the damage, Neuville was forced to pull over and retire from the action.
The Belgian had already endured an eventful morning that included being distracted by a bee that had entered his cockpit and a puncture.
Hyundai will fix the car overnight but it is unclear if Neuville will rejoin the rally tomorrow.
“There was no warning at all. The damper must have gone a couple of corners before and obviously at the next corner it came out of its position the driveshaft went immediately and it was all over,” Neuville told Autosport.
“It is frustrating and it has hit us very hard. We were following the plan, we were in the fight despite not the best road conditions and I had a good feeling in the car as well. Obviously we expected better, but the luck was not with us.
“We have to analyse tonight. If there is a chance to get back in the points there is a reason to drive tomorrow, but that will be the only reason.”
Hyundai team principal Cyril Abiteboul says the team will conduct a thorough investigation into the failure.
“What we can say that a nut came loose in a compression and the suspension failed,” Abiteboul told Autosport.
“We need to have a better understanding of what happened whether it is design related or not. One thing I can say is we didn’t touch the suspension in the service, so it is not finger trouble due to some mistake.
“Having said that these things should not happen. We need to make sure how to stop this happening in the future.”
Neuville’s exit leaves Esapekka Lappi as the top placed Hyundai in fourth, 54.0s adrift of leader Ogier heading into Saturday after an impressive debut on Kenya’s tough stages.
Despite the high chance of hitting trouble in this rally, Abiteboul has told the Finn, who won stage three, to adopt a "maximum attack" approach on Saturday.
"Esapekka was put to the challenge and was very positive in his attitude and very patient. He was very smart, and very quick in learning about Kenya. It is quite remarkable and clearly a sign of light for the team and hopefully we can perform like that with him for the rest of the rally.
“We have lost in Thierry one of the key targets for the weekend. We all know the key objective for Hyundai in the WRC this year is Thierry in the drivers’ championship and we know that for this rally it is massively compromised.
“Esapekka is not in the fight for the championship so for me it is maximum attack from Esapekka tomorrow and maximum learning because when it comes to next year, maybe with us, it will be important to have as much experience and mileage to be in a better position.”
Hyundai’s third car driven by Dani Sordo also remains in the points paying positions in sixth albeit 1m28.4s. The Spaniard bizarrely dropped 24.8s on the day's final stage after getting lost in his own dust.
“It is kind of stupid. I did one corner and then there was a hairpin in the opposite direction,” said Sordo.
“I saw all the dust coming towards me so I had stop and I didn’t know where I was. I stopped for 10 seconds. The first pass was okay but maybe the wind changed and came from the other side.”
