Volkswagen is making a $17.7 million expansion to the Chattanooga plant's assembly shop parts warehouse.
The warehouse extension, slated for completion by August 2014, will add 198,400 square feet, giving VW about 303,000 square feet of space.
"By extending our warehousing capacity inside the plant, we are streamlining our logistics operations, making the production of the Passat even more efficient," said Frank Fischer, the factory's chief executive.
By extending the warehouse building in the assembly shop, Volkswagen will eliminate the need for two current external staging warehouses.
The expansion will add 14 dock doors for parts delivery with the option to add 20 loading docks in future, according to VW.