Mercedes boss Toto Wolff has welcomed the added competition of Ferrari and Red Bull and believes it will help them continue setting the benchmark in Formula One.
The German manufacturer has dominated the past two seasons of F1 - winning 35 out of the past 41 races on the way to back-to-back drivers' and constructors' titles.
Despite Nico Rosberg winning three out of three races in 2016, Ferrari and Red Bull have been buoyed by added pace as they look to close the gap to Mercedes.
Wolff believes both are just one step away from getting on Mercedes' level, but the 44-year-old told Omnisport he is not concerned by the prospect of added competition.
"Concerning the pace and the performance they have closed the gap. They are close. But their car is not yet stable enough," he said.
"That is a normal development. When you make your car faster in the first step, you have to make it stable in the second. That is where they're at right now and that's our advantage at the moment.
"But I am not dreaming. They are strong and they will get even stronger. In the end this is the thing we need. We need an opponent. Formula One needs this combination.
"For us this is really good and we'll continue to try setting the benchmark. If Ferrari wins one or two races we can live with that."
Rosberg leads the drivers' standings by 36 points over defending champion Lewis Hamilton, but Wolff insists the Brit will fight back.
"[Rosberg's] performance is really good. He won the last six races and was able to continue his good run. He also has the luck on his side right now," he added.
"He is leading the list with a comfortable amount of points. But it is still really early. There are 18 races coming.
"[Hamilton] never gives up. The last weekend in Shanghai he was unlucky. The goal was to make the first lap without any crash. So he did not go 100 per cent even though he was after the start between many cars.
"But everything can change. He showed that he's got the speed with two pole positions. Lewis has not lost anything of his power."