HONG KONG (Reuters) – Electric carmaker NIO Inc, among rivals to Tesla in China, launched a $650 million five-year convertible bond on Wednesday, aiming to use the proceeds to fund expansion.

The Shanghai-based carmaker’s move to raise capital via an equity-linked bond, only four months after it listed in New York, mirrors that of China’s Netflix-like video platform iQiyi, which sold a $750 million convertible bond in November after going public last year, highlighting the growing appeal of convertibles for high-growth companies in need of cash.

Convertible bonds are a cheaper funding avenue due to their lower coupons in exchange for giving the bondholder the option of converting the debt into company shares at a set price in future. The equity link gives investors fixed returns and the prospect of profiting from a rise in the issuer’s share price.

NIO was marketing a five-year convertible bond with a conversion premium of between 27.5 percent and 32.5 percent, according to a term sheet seen by Reuters. The coupon range is between 3.5 percent and 4 percent.

The startup could raise as much as $750 million if a greenshoe, or over-allotment option, was exercised.

The company’s shares closed at $6.94 on Tuesday and were up about 16 percent since they started trading in September.

Louis Hsieh, NIO’s chief financial officer, told investors on a call that part of the reason for selling a convertible bond was to make up the difference between what the company raised in its IPO and what it had originally sought to raise.

NIO raised $1 billion in its U.S. IPO but it had earlier aimed for $1.8-$2 billion, Hsieh said.

Asked about the timing, Hsieh said the convertible bond market was receptive to a deal and he did not want to wait until March or April and risk a possible worsening in U.S.-China trade tensions.

Convertible bonds are booming in Asia, hitting their highest volumes last year since the financial crisis, with $35.5 billion raised, according to Refinitiv data.

Their appeal is growing at a time when interest rates are rising, driving up borrowing costs when companies in Asia face almost $500 billion in maturing dollar-denominated bonds over the next two years.

For tech companies or startups, which can have more volatile stock prices and are often unrated, convertible bonds also represent a cheaper funding alternative than straight debt.

China is the world’s largest and fastest-growing market for new-energy vehicles (NEVs), a category comprising electric battery cars and plug-in electric hybrids, but competition is fierce as Beijing looks to rein in subsidies that led to a huge array of EV contenders entering the market.

NIO’s revenue and deliveries of its electric SUV soared in the third quarter of last year.

It plans to use the proceeds of the convertible bond for research and development, development of manufacturing facilities and sales and marketing.

Chinese internet giant Tencent Holdings and Hillhouse Capital Group – NIO’s existing backers – will buy $30 million and $10 million of the convertible bond, respectively, according to another term sheet seen by Reuters.

Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS are joint bookrunning managers for the deal.