CHATTANOOGA, Tenn. -- Volkswagen is jumping into the U.S. auto market with a domestically built Passat that is bigger and cheaper than its European counterpart, bidding to break into the competitive midsize sedan market.

At the grand opening of its new plant in Chattanooga, the German automaker presented the 2012 Passat on Tuesday as the key to building U.S. sales to 1 million units by 2018.

The factory has been producing cars since April and Volkswagen officials took the opportunity to show off their German-designed sedan and the $1 billion plant.

The new Passat will go on sale in the third quarter for $20,000, about $7,000 cheaper than current models built in Germany and close to the prices of such competitors' models as the Ford Fusion, Toyota Camry, Honda Accord and Hyundai Sonata.

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Jonathan Browning, president and chief executive officer of Volkswagen Group of America, said the automaker wants to make German engineering more accessible to North American buyers.

"The Passats produced here in Chattanooga will be a key enabler to our growth, allowing us to compete in the core of the midsize sedan segment," Browning said before the unveiling of the plant.

Volkswagen intends to produce 150,000 sedans annually at Chattanooga for the American market, a big jump for a car that has sold a peak of only 80,000 units annually in the U.S. in its history. Analysts said high production is needed if VW is to keep pace with competitors.