Toto Wolff is wary of Honda, conceding that McLaren's engine partner will be "a strong competitor" in the future despite a dismal 2015 campaign.
Honda returned to Formula 1 with McLaren last season but where unable to recapture the glory of yesteryear.
Instead the partnership managed just 27 points and a record 105-place grid penalty for the Belgian Grand Prix.
But despite their troubles, and there were many, Wolff believes Honda made great strides throughout the season and will be challengers in the future.
"The threat is permanent," Wolff said in an interview with his Mercedes team's YouTube channel.
"Honda is a huge organisation with lots of resource, and they were the power unit with the most impressive development curve through 2015.
"Even if it was a very difficult year for them, it was still very good what they achieved in terms of how they progressed through the season so I have no doubt they will be a strong competitor in the future."
The Mercedes motorsport boss also weighed in on Manor.
The backmarker team has swapped from Ferrari to Mercedes power for this year's championship while also signing Mercedes protege Pascal Wehrlein as one of their race drivers.
However Wolff feels there is even more going in their favour as Manor have also brought in Nikolas Tombazis and Pat Fry, both of whom previously worked for Ferrari, as well as former McLaren sporting director Dave Ryan who will fill the role of racing director.
"Manor will make a big step up and not only because of the engine," the Austrian predicted.
"There is a good bunch of people coming together: impressive individuals, with the right budget and right attitude, and Pascal in the car.
"I have confidence that the car and driver will have highlights and could be a solid midfield runner."