London (CNN Business) Tesla is selling emissions credits to Fiat Chrysler as the Italian automaker tries to avoid steep EU fines on carmakers who fail to meet tough new pollution standards.

The companies have formed an "open pool" that allows their fleets to be counted together under new rules that restrict emissions of carbon dioxide (CO2), according to documents published by the European Union.

The auto industry needs to slash CO2 emissions of vehicles sold in Europe by 25% to meet the aggressive caps by 2021, according to UBS. The Swiss bank's analysts estimate that will reduce EU carmaker profits by €7.4 billion ($8.3 billion) combined.

Volkswagen VLKAF Companies that are investing heavily in hybrid or electric vehicle technology, such as, are well positioned to meet the new standards. Laggards will need to find other ways of avoiding fines.

Fiat Chrysler FCAU UBS analysts warned last week thatwas the automaker with the "highest risk of not meeting the target."

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