"I think we are realistic about where we are and what we want to achieve," Vettel said Thursday.
For the next few races, he added, the team will focus on beating the teams behind it in the constructors' standings, "but knowing that obviously Mercedes is in a very, very strong position."
Mercedes had been expected to dominate the 2015 F1 season like it did last year, when the team won 16 of 19 races and Lewis Hamilton captured his second world championship.
But Vettel took advantage of Mercedes' tire degradation problems in the tropical heat at the Malaysian Grand Prix last month to surprise the rest of the field with his first race victory since leaving Red Bull to join Ferrari at the end of last season.
Vettel described how "emotional" it was to stand atop the podium in Malaysia — his first F1 victory since the Brazilian Grand Prix in November 2013 — and then visit Ferrari headquarters in Maranello and see the red Ferrari flag at the gate signifying his race win.
"It had been a long time since there had been a flag (there). I think some 10 years ago, there were a lot of flags," said Vettel, a four-time world champion with Red Bull. "This flag will stay there for the rest of the year and we will of course try to put another one sometime soon."
Hamilton will try to prevent that happening after the Chinese Grand Prix, a race he has won three times.
While Mercedes boss Toto Wolff called Ferrari's win in Malaysia a "wake-up call," Hamilton said he believes the German team will be much stronger on the track in Shanghai, which favours the silver cars with its long straights and cool temperatures.
"We're not stressed or anything," he said. "I think you can't get every weekend right, you know. It wasn't even that much of a disaster of a weekend for us."
"People have definitely blown it out of proportion. And hopefully we'll correct that this weekend."
Both he and Vettel, however, acknowledged that Ferrari showed increased pace compared to last year. Whether it's enough to close the gap with Mercedes, Lewis is not quite certain.
"I think it's all a big guess at the moment. I don't really know. They were very, very quick, they did a great job," he said.
Hamilton finished second behind Vettel at the Malaysian GP, with teammate Nico Rosberg in third.
Rosberg is also hoping for a boost in Shanghai after what he deems a slightly disappointing start to the season. He's been on the podium twice — second at the Australian Grand Prix and third in Malaysia — but after his breakthrough season in 2014, he was certainly hoping for more this year.
"Every race is important, but it's still a long way to go and consistency is still going to be very important," he said. "I'm not panicking in any way."
For Red Bull and McLaren, nearly anything would be an improvement over the first two races of the year.
Red Bull's drivers, Daniel Ricciardo and Daniil Kvyat, fared worse than their junior team counterparts from Toro Rosso in Malaysia due to overheating brakes. For the Chinese Grand Prix, Red Bull has decided to return to the brake package it used last year.
"Obviously we're experimenting with a few things but I think for now, we're going to go back to what we know and get our basics right," said Ricciardo, who captured the only three races last season not won by Mercedes.
New-look McLaren, which brought driver Fernando Alonso back seven years after his last stint with the team and started a new partnership with Honda in the off-season, is still trying to find its stride after early-season technical issues.
"A lot of people have asked me how I'm so positive and how the team are so positive and upbeat, and it is because we see a great future," driver Jenson Button said.