Andrew Shovlin admits Mercedes have made some steps in the right direction on their chassis and power unit which has made them more competitive, although he is sure that Red Bull have pace in hand.
Max Verstappen dominated last week's Styrian GP and was looking very strong in FP1 and on the medium tyres. Shovlin has explained what Mercedes have worked on to find more performance in the W12 during the days between the two Austrian rounds.
"We'd been busy this week trying to find improvements on both the chassis and the power unit and from Friday's running it does look like we've made some steps in the right direction," said Shovlin.
"The conditions are quite different to last week, cooler air and a much cooler track which is certainly helping deal with the softer compounds."
Lewis Hamilton led a surprise Mercedes 1-2 in the second practice session at the Austrian Grand Prix, with Verstappen 0.217 seconds behind the seven-time world champion.
"The single lap was encouraging in that we were extracting good grip from the tyres, not always something we have managed on the softest Pirelli rubber," Shovlin told the press.
"But we're under no illusion that Red Bull will have plenty in hand for tomorrow."