Mercedes trackside engineering director Andrew Shovlin has conceded the team is suffering a double deficit to F1 rivals Red Bull and Ferrari and has "quite a lot to find".
Mercedes may be sitting second in the constructors' standings after the opening two races of the season but this elevated position is only due to Red Bull's late double DNF in Bahrain.
In reality, Mercedes has the third-fastest car although finds itself in no man's land between the top two and the chasing pack, highlighted in Saudi Arabia on Sunday when George Russell finished fifth albeit 32 seconds behind winner Max Verstappen.
Russell revealed post-race that Mercedes is currently a second-per-lap slower in a grand prix, while the average deficit in qualifying over the first two races is almost eight-tenths of a second.
“We're under no illusions what that performance gap is, and in Jeddah, it was ultimately a bit bigger than in Bahrain," revealed Shovlin.
"We've got quite a lot to find both in qualifying and on the long run if we want to challenge the Ferrari and the Red Bull cars.
"However, behind us, it looks like we have a bit of a margin to that midfield."
Mercedes "breathing space" a chance to experiment
Mercedes has conceded it pushed too far with Lewis Hamilton's set-up changes ahead of qualifying in Jeddah, leading to the seven-time champion exiting qualifying in Q1 for the first time since 2009 on pure pace alone.
Given the position it occupies in the pecking order, however, Shovlin explained: "We need to do a good job to be ahead of them [Red Bull and Ferrari].
"But we have a bit of margin and that buys us a bit of breathing space to allow us to experiment on the weekends, to try and bring solutions to lift the level of performance of the car.
"So, ultimately though, this is a problem that is going to be fixed back at the factories both in Brackley and Brixworth.
"Everyone is working very hard to try and understand the issue and bring solutions and we are going to be doing that in a phased way over the next few races.
"At the track, we are going to be doing as much as we can to minimise damage, to score as many points as possible.
"So, really there are two elements to this: maximising the performance in a given weekend but then the bigger part of this is trying to get back to a level where we can compete for pole positions and for race wins.”