The shares of Nissan Motor fell nearly 7 per cent on Monday as markets feared the proposed joint holding company deal with Honda Motor might not be favourable to its shareholders.

The Nissan stock tanked 13 per cent over two days even as it surged 60 per cent from December 17, 2022 before the announcement of the deal.

Analysts said the holding company deal will result in a less advantageous share ratio for Nissan investors.

A Nikkei report estimated the Honda-Nissan share swap at 5:1.

The ailing Japanese automaker aims to establish and list a joint venture holding company with Honda in August 2026, according to a December 23 announcement on the deal.

Honda and Nissan expect big benefits from their potential merger to create the world’s third-largest auto group but intense competition from China raises questions about whether they can make it work in time.

The Japanese automakers said they had agreed to begin formal talks on a merger.

The outcome is not certain and will depend partly on troubled Nissan making progress in its turnaround.

Nissan’s junior partner, Mitsubishi Motors will decide by next month whether it plans to take part.

The automakers are targeting more than 1 trillion yen ($6.4 billion) in synergies by leveraging a common platform, shared research and development (R&D) and joint procurement.

Their operating profit target of more than 3 trillion yen represents a 54 per cent increase on their combined results last year.

But the full effect of synergies is not likely to be felt until after 2030, Honda CEO Toshihiro Mibe told a joint press conference last Monday.

The companies need to build up capabilities to take on Chinese rivals by then, he said, or face being “beaten”.

Analysts question whether they have that much time.
The biggest immediate hurdle for both may be their model line-up.

Neither are particularly strong in EVs. Nissan, although an early pioneer with the Leaf, later stumbled.

A new EV, the Ariya, was supposed to challenge Tesla’s Model Y but was hampered by production problems.

Honda has focused more on hybrids and unlike Nissan offers the models in the United States, where demand for the cars has surged.

“Both companies lack compelling EV offerings, and the combined entity would still face the challenge of a new EV model pipeline and R&D in technology,” said Vincent Sun, a senior analyst at Morningstar.

A standardised vehicle platform would produce cost synergies, but that, too, would take time to develop.

It “may take longer than anticipated” to fix the business, Sun said.