Mercedes remains confident that its next major upgrade will recover the performance deficit its rivals have opened up at recent races.
After winning the first six races of the season, Mercedes has won just two of the following six, while Lando Norris has taken back-to-back victories at the last two rounds for McLaren.
Following the Dutch Grand Prix last weekend, championship leader Kimi Antonelli, who finished second to Norris but still has a substantial lead in the drivers' championship, said Mercedes no longer has the fastest car on the grid.
Team principal Toto Wolff said in Zandvoort that Mercedes "haven't got the money" to match the rate of development of McLaren and Ferrari at recent races -- a reference to how much the team has already spent under this year's cost cap rather than a reflection of its overall finances.
While Mercedes has introduced fewer major upgrades than its rivals this season, trackside engineering director Andrew Shovlin said there is still a major performance step planned for the final third of the season that should see the team level up.
"We would be concerned if the performance deficit [to McLaren and Ferrari] exceeded the gains we can see ready to come through the wind tunnel. That is not the case," he told Mercedes' podcast.
"We are reasonably confident that much of the current picture comes from the phasing of updates, although Zandvoort also left us asking whether we extracted the maximum from the car. This close fight is broadly what we expected at this point of the season, perhaps even slightly better.
"Our larger package is targeted for the block of flyaway races later in the year. We are looking forward to it, but we are also enjoying the current challenge. George took pole for the sprint [in Zandvoort], and we qualified second and third for the grand prix. We have not disappeared from the picture."
Shovlin believes his team's rivals may have front-loaded their development this season in an effort to close the initial gap to Mercedes at the start of the year.
"Many of our rivals spent the early part of the year trying to catch up, so we expected them to introduce updates more frequently," he said. "That does not necessarily mean they will have added more total performance by the end of the season; they may simply have staged the investment differently and at greater cost."
Referencing Wolff's comments from Zandvoort, deputy team principal Bradley Lord outlined the fine balance all teams face in spending their budget in the most efficient way.
"It is the reality every team faces under the cost cap," Lord said. "Formula 1 organisations must balance headcount and salary costs against the money available for hardware.
"They must consider how much of the current car was produced this year rather than last, how many spare parts to manufacture and how much stock to carry at the factory and with the race team. Every team is trying to find the optimum balance.
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"We continue to find performance in the wind tunnel, but the challenge is deciding when to convert that virtual gain into real parts. With a floor, for example, do you manufacture a new one as soon as performance is found, or align the upgrade with the point at which a fresh floor is required simply to complete the season? Finding those efficiencies is the art within the science.
"A team in catch-up mode may make different choices from one that is leading. By the time we race in Mexico, Brazil and Las Vegas, it does not necessarily follow that another team will have introduced more total performance; it may simply have released it in smaller, more frequent steps."
Shovlin said there is also a balance to be found between spending money on the development of this year's car versus next year's car.
"Under the cost cap, the same annual budget must support the car currently racing, its in-season development and the car that follows," he added. "Towards the end of the year, we also begin manufacturing components for the next car.
"There is always a push and pull between those demands. If we believed these championships depended on having an update at Zandvoort, we would probably have found a way to achieve it.
"We are in the enviable position of leading, so it is logical not to throw as many parts at the current car as competitors who are chasing. We must remain competitive this year while also thinking about the next championship. Being in front allows a little more long-term thinking.
"We have made calculated decisions about the most cost-efficient route to the end of the year. After every race, however, we reassess whether we are doing enough, bringing enough and whether anything can be pulled forward."