Technical director James Allison, whose long-term contract extension was announced on Thursday, told reporters he felt mixed emotions ahead of the launch of the new W15 car next month.
"It’s impossible at this time of the year to be anything other than apprehensive, coupled with excited, coupled with frightened. Those are always the emotions that you feel," he said.
"I would imagine that even in Red Bull, after a year of such good performance, they will not be sleeping easy in their beds either, because no one knows what everyone else will deliver.
"However, what we do have some hope for is that some of the more spiteful characteristics of the rear-end of our car will be a bit more friendly to us and the handling of the car a happier thing."
Red Bull won 21 of 22 races last season with Max Verstappen (25) taking his third title in a row. Mercedes finished second overall, after a close battle with Ferrari, but without a victory for the first time since 2011.
Hamilton hopes to have a shot at a record eighth title while fellow-Briton Russell, aims for a first.
Allison emphasised Mercedes were a challenger rather than a favourite but saw reasonable grounds to believe they had made some gain, along with making the car lighter and adding downforce.
"Whether it’s enough, time will tell, but it’s nevertheless going to be interesting because we saw some things we knew were problems, we’ve hypothesised what the reason for those problems were and we’ve fixed those reasons," he said.
"It will be interesting to find out how accurate we’ve been with that diagnosis."
Team boss Toto Wolff said last month that Mercedes, winners of eight successive constructors' titles to 2021, had a Mount Everest to climb in order to catch up with Red Bull and Allison said the comparison was apt.
"Everest is the sternest of challenges but it is nevertheless something that is possible to do, and I think that's how we're taking this." he added.
Allison said the grid was gradually compressing as teams followed similar design paths and expected the action to be closer at the top end.
The new car will be unveiled at Silverstone on February 14th. Testing is in Bahrain from February 21st-23rd before the opening race there on March 2nd.
