Fiat Chrysler Automobiles has entered into an emissions pooling agreement with Tesla in order to avoid fines for violating new European Union emissions rules.

The two carmakers reached an agreement that could be worth hundreds of millions of Euros, according the Financial Times.

Emissions pooling is allowed under EU rules, if manufacturers follow the correct application procedure. It enables groups, such as PSA Group, to count all the emissions across its brands together.

Separate brands are also allowed to apply to form pools.

The agreement means FCA can count Tesla registrations alongside its Alfa Romeo, Jeep and Maserati sales, bringing down its average fleet emissions.

By 2021, manufacturers need to achieve an average fleet emissions figure of 95g/km or face fines for every car sold that exceeds this figure.

According to PA Consulting, FCA’s average fleet emissions were 120g/km last year and, prior to this announcement, was expected to be 6.7g/km over the target in 2021.

FCA has been lagging behind rivals in the development of electric vehicles but plans to spend €9bn (£7.75bn) in the next four years to develop electric cars.

Tesla has made more than £765m in the last three years by selling emissions credits to other manufacturers in the USA.