The Alternative for Germany (AfD), formed in early 2013 on the back of concern in Europe's top economy about costly EU bailouts, made a breakthrough last year by winning seats in the European Parliament followed by three state assembly gains.
Its advances have emboldened some within its leadership, which is due to gather the rank and file in the northwestern city of Bremen on Saturday and Sunday, by stoking ambitions that have led to internal party conflict.
Now the emergence of the new Pegida movement, a right-wing populist group that rails against Islam and "criminal asylum seekers", has further exposed the fault lines within the AfD and could risk undoing the party.
Political scientist Alexander Häusler, of Düsseldorf University of Applied Sciences, said the challenge was to unify a party base that falls into three factions - neo-liberal, national conservative and a hard-right populist wing.
"The party finds itself in a paradoxical situation," he told AFP.
"It can occupy the space that's been left vacant in Germany to the right of the conservatives, but only if it manages to incarnate these three strands, while handling its internal conflicts at the same time," he said.
'Risk too big'
Pegida, which drew 25,000 supporters in the eastern city of Dresden earlier this month but has since seen numbers fall off, may appeal to those in the AfD with conservative and populist leanings.
Some AfD members have held exploratory talks with Pegida, which has seen leadership turmoil of its own with several of its top organisers stepping down in recent days in the wake of its leader's resignation over a photo he posted himself styled as Hitler.
However neo-liberals eye the group, which Chancellor Angela Merkel has vocally opposed, with suspicion.
"I advised my colleagues not to participate (in Pegida demonstrations) because that gives the media arguments for defining us as populists and xenophobes," Hans-Olaf Henkel, a leading member of the AfD's neo-liberal wing, said.
"The risk is too big," the former president of the Federation of German Industries added on public broadcaster ARD.
The AfD lost its deputy leader in Rhineland-Palatinate state, Beatrix Klingel, who stepped down this month over fears the party was veering too far to the right.
"I don't want to give a leg up to perhaps an emerging German National Front," she said, referring to France's far-right party.
But for more right-leaning members, such as Alexander Gauland, AfD head in Brandenburg state, one of the three regional parliaments where the AfD has seats, Pegida protestors represent natural allies.
'Depends on cohesion'
The AfD's main battle cry when it was founded in the wake of the financial turbulence that almost brought the eurozone to its knees was for an orderly dissolution of the euro.
But the party, created by economics professor Bernd Lucke, has sought to widen out its appeal, incorporating populist issues such as law and order, immigration and traditional social values.
The appointment of Greece's new anti-austerity government under Prime Minister Alexis Tsipras, who has vowed to renegotiate the country's bailout, may lend further support to the AfD by reviving German fears about Greek debt.
The AfD, which narrowly missed entering the German parliament in the 2013 general election, has so far only gained a toehold in states of the former communist East but hopes to extend its presence into western Germany next month.
Polls suggest it may enter Hamburg's city-state assembly in a February 15 vote but "its result will, in large part, depend on its ability to demonstrate its cohesion during its congress" in Bremen, Häusler said.
He said Lucke, the AfD's most high profile figure, would "seek to present unity", especially after a recent bitter power struggle over paring down the party's three-member leadership to a single president.