“It’s a very daunting effort,” said Jack R. Nerad, executive market analyst for the vehicle information provider Kelley Blue Book. “If they’re going to grow to the level that they want to, they’re going to have to take it out of somebody else’s hide. That’s a tough task, because there are no weak sisters in this market.”

Still, Volkswagen executives say they are confident that annual sales in the United States will surpass a million vehicles by 2018, nearly triple last year’s total of 360,179. The company, based in Wolfsburg, Germany, aims to become the world’s largest automaker by then.

Central to those ambitions is the large investment in the United States. Building the Chattanooga plant, Volkswagen’s only factory in the United States, and developing new versions of the Passat, Jetta and Beetle add up to $4 billion, executives said.

By manufacturing locally, and buying 85 percent of the North American Passat’s parts from nearby suppliers, the company is able to greatly reduce its costs. Executives said the savings was the biggest reason Volkswagen could charge less for the Passat, even while adding standard features like dual-zone climate control and Bluetooth connectivity. Some specifications were also changed from the 2010 version — no 2011 model was built — like dropping a turbocharged engine from the base model.

Building Passat in Tennessee reduces shipping and labor costs, but more important it keeps profits from being wiped out by unfavorable currency exchange rates. That is a big reason other foreign carmakers like Toyota and Honda build a majority of the vehicles they sell in North America at plants on the same continent.

“Currency fluctuations can really clobber a European manufacturer,” Mr. Nerad said. “All of a sudden your cost basis is a lot better.”

The Chattanooga plant, which employs 1,700 people and builds cars for the United States, Canada and Mexico, has a capacity of 150,000 a year. Only the Passat will be built there initially, though executives left open the possibility that other models would be added later. Martin Winterkorn, Volkswagen’s global chief executive, told reporters before the plant opening that the company would decide within a year whether to build cars for its Audi luxury brand in the United States as well.