Mercedes boss Toto Wolff believes Ferrari now holds a crucial edge in the engine department that will be difficult to match, forcing the Silver Arrows squad to outdo its rival in other areas.
Since the start of the hybrid turbo era in 2014, Mercedes' power unit has set the standard in terms of output, energy efficiency and reliability.
This year however, Ferrari's engine performance has surpassed Mercedes, producing big gains for the Scuderia's low-downforce SF90, as Charles Leclerc's run of four consecutive poles - and the team's three wins in four races - recently demonstrated
Wolff says Ferrari's significant engine gains have defied the norm.
"It’s certainly an outlier," said the Mercedes boss, quoted by Motorsport.com. "Because normally with maturing regulations to find these big steps is certainly unusual.
"We all need to understand how we can increase our engine performance and at the same time find the right power/drag ratio and understand the tyres. It’s a combination of things.
"I think we had situations where Ferrari was very strong [in the past], but at the moment they just crush everybody with their straightline speed, so it’s very difficult to compensate that round the track. This is a situation that we need to overcome."
Engineers at Mercedes' Brixton High Performance Powertrains department are digging deep to find and extract more power from their unit.
But Wolff believes that Mercedes' best approach to beating Ferrari is to focus on improving its overall package while also executing flawlessly its strategies on race day.
"I think we have to look at all areas of the engine," he added. "Is there some innovation that we should have spotted?
"I think on pure performance, there is not a lot to come. I think you’ve just got to acknowledge that there is a certain gap that is almost uncatchable.
"But we’ve got to do an even better job of putting a good chassis on the track, and understanding the tyres, and running the right race strategy. This is where our opportunities lie.
"Clearly with their kind of power unit performance we shouldn’t be expecting to dominate the coming weekends."