Mercedes engine chief Andy Cowell has warned against writing off Honda based on last year's performances, saying Ferrari's recovery is proof that great strides can be made.
The introduction of the 1.6-litre turbocharged V6 engine in 2014 saw Mercedes come to the fore, winning back-to-back championship doubles.
But while Ferrari were woefully off the pace in the first season, the Scuderia fought back the following year as they used their development tokens to close the gap to Mercedes.
This year Ferrari are again expected to make inroads while Cowell has warned that Honda, who power McLaren and managed just 27 points last season to finish P9 in the championship, could also enter the fray.
"If we look at what Ferrari has done over the last 12 months, it's remarkable," the engine chief said. "Their improvements have been a huge credit to their reshuffle, their enthusiasm.
"Everybody here is going 'I wonder how we’re going to do?’ Nobody here is assuming we are going to win, everybody here is assuming that we’re going to get beaten by Ferrari, and Honda are a big threat.
"Honda have come in quickly and they are learning in front of the public but they’re hugely determined and partnered with McLaren who are hugely determined. We know exactly how McLaren work in terms of a data-driven approach, so they are going to make some big, big gains."
He added: "Renault’s determination as they’ve shown with becoming a lot more involved now in Formula One, instead of just being a power unit provider there has been a team restructuring. There are going to be some great stories to talk about."
Cowell, though, is confident that Mercedes will make "huge" gains of their own in the engine department as he feels they have yet to reach the limit of what their power unit is capable of.
"We've made some huge gains in the last years as we have done the development. We have good gains over the past two years of racing. I don't see that stopping. I don't think anybody here sees that we have reached the limit.
"Where we are at today with our thermal efficiency is mind blowing when you step back and look at it."