Sepang: Mercedes boss Toto Wolff told his team not to panic but accepted that Ferrari had launched a new era in Formula One with their stunning win at Sunday`s Malaysian Grand Prix.
Wolff said the Silver Arrows now face a capable new challenger after Sebastian Vettel held off Lewis Hamilton and Nico Rosberg at a sun-baked Sepang circuit.
Mercedes dominated 2014 and they cruised to a one-two finish at the season-opener in Australia, but Wolff admitted they were caught on the hop by Ferrari`s raw pace on Sunday.
"It`s not the end of an era. It`s maybe the start of a new era of a good battle, a challenge we want to take on," Wolff said.
"It`s about staying calm and assessing and trying to get back with the speed we`ve had in the last couple of races."
He added: "There`s no reason to panic. Probably we`re back into a more normal racing season where you have more than just one contender and more than just one-twos every weekend. Back to normal business."
He said Mercedes would pick over their performance after a troubled outing marked by garbled radio communications, which drew complaints from both drivers.
Strategy was also a major issue with three pitstops and a questionable use of tyres putting them at a disadvantage compared to Vettel, who only stopped twice.
It brought a halt to a run of eight straight Mercedes victories, stretching back to Daniel Ricciardo`s triumph for Red Bull in Belgium last August.
"Today things didn`t pan out the way we expected them to pan out," Wolff said.
"This is one of the topics. We need to sit down and say, Okay, what did we do wrong? And it`s not one particular thing, it`s a couple of things where we can improve."
"It was clear that the winning streak was not going to go on forever, anyway. And today, we were beaten fair and square. We weren`t the fastest car today."
The Mercedes drivers will certainly not back away from the Ferrari challenge, starting with the Chinese Grand Prix in Shanghai in two weeks` time.
"All I can say now, on behalf of our team, is: game on, Ferrari!" said Rosberg.