George Russell says Mercedes managed to find "five or six" tenths overnight after a difficult Friday during the Bahrain Grand Prix weekend.
Lewis Hamilton believed they were a second off Red Bull following the long runs during FP2, however a change made to the W14 after overnight work enabled them to close the gap by half-a-second and stay close in the battle for pole.
"It's a lot better than what we expected. We had a really tough Friday and we expected to add a bit of performance overnight. But the performance we added probably exceeded expectations," he told media, including RacingNews365.com.
"With the change we made we expected to find probably one tenth [of a second] and we found maybe five or six tenths, and we need to understand why that is."
Russell is optimistic that Mercedes can challenge Ferrari in the race, however he concedes that the blistering pace from Fernando Alonso makes him a "dark horse" for the team.
"I think their race pace is always a little bit worse than their qualifying pace, and with us it is the opposite.
"So qualifying three tenths behind them when they're probably being the fastest car over a single lap, I think we're in a good place to fight for that P3."
"But to be honest, Fernando's probably more of a dark horse than Ferrari."
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Russell: In a much better place than we were with W13
Russell believes the team is in a "much better" position compared to where it was 12 months ago with the W13, explaining how the team can chase overall performance rather than focusing on a specific area for most of the year.
"Ultimately the car is feeling nicer to drive, so I think we're in a much better starting place than we are compared to W13," he explained.
"Now we can just focus on adding global performance rather than spending three quarters of a year problem solving.
"It took us probably 16 races last year to get a car that we were relatively happy with, [whereas] this I feel we're in a much stronger place to build upon."