Mercedes team principal Toto Wolff has likened the challenge of catching Red Bull to that of climbing Mount Everest after his team scored less than the points of the world champions this year and finished a distant second in the standings.
Red Bull won the constructors' title in dominant style this year, taking victories at all but one of the season's 22 races while Max Verstappen notched up a record 19 wins in a single year to secure the drivers' crown.
The Dutchman has won the last three drivers' titles -- extending his advantage over his nearest competitor each time -- while Red Bull has replaced Mercedes as Formula One's dominant force since the introduction of new technical regulations in 2022.
"Red Bull has started these regulations in 2022 with a massive advantage and have been able to retain it," Wolff said. "We need to have a lot of respect for their achievement, in the engineering side and the driver, and beating them under the current regulations is against the odds, that's clear."
Mercedes secured second place in the constructors' championship at Sunday's Abu Dhabi Grand Prix but scored just 409 points to Red Bull's 860 this year.
Work on next year's cars has been underway for several months, with Red Bull neglecting the development of this year's dominant RB19 to work on the upcoming RB20, while Mercedes has opted to make significant changes to its car concept in the hope of unlocking a large performance gain over the winter.
"We have seen with McLaren an update unlocked a second of lap time and with AlphaTauri coming strong at the end and Aston Martin over the winter, there is a key to unlock dramatically more performance," Wolff said.
"I think us making this honest assessment that this car is never going to be good enough to fight for the championship, and we have taken the decision in Spring that we have got to go back to the drawing board and come up with something new next year. But Mount Everest is in front of us."
Asked if he was optimistic about 2024 based on the progress he had seen at Mercedes' factory, Wolff added: "I have never felt optimistic about anything in my life. That makes it sound miserable, but it has protected me about managing my expectations and pushing harder, because I think it is never good enough.
"That's why today I sit here with a bittersweet feeling that we have won P2 today but lost P1. So we are changing the concept, we are completely moving away from how we laid out the chassis, the weight distribution, the airflow, I mean literally there is almost every component that has been changed because only by doing that do we have a chance.
"We could get it wrong also, so between not gaining what we expect to catching up, making a big step and competing at the front, everything is possible. If you ask me today, there is always scepticism, but that is the mentality in the team that pushes us forward to never give up."