Ferrari showed impressive pace during pre-season testing and are considered the team most likely to dethrone Mercedes, who have dominated the last two seasons.
Asked whether the Italian glamour team were strong enough to challenge for the title, German Vettel was forthright.
"I think we have," he told the pre-race media conference at Albert Park ahead of the season-opening Australian Grand Prix.
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"The question is whether we are ready in time. But we are making progress.
"And we have made a step over the winter. But our target is to turn things around. Mercedes are still the favourites but we are trying to become the favourites."
Vettel said Ferrari's new SF16-H was a "big improvement" and a "big step forward overall" on last year's car.
"We've done a very, very nice job... and it allows us to be first of all quicker from the start and also have more chance of improving throughout the year," he added.
"So that's good news. Whether it's good news right from the start, I don't know. But we know that our challenge is very, very big.
"We know the bar is high but we are pushing, pushing very hard."
Ferrari have not won a driver's title since Finland's Kimi Raikkonen was victorious in 2007. They were last constructors' champions in 2008.
They were, however, the only team apart from Mercedes to put a driver on the top step of the podium last year, with Vettel snaring the three victories not taken by reigning champion Lewis Hamilton (10 wins) and his team mate Nico Rosberg (six).
Vettel's comments echoed team principal Maurizio Arrivabene's declaration last month that the team's goal was to fight for the title right to the end of the season.
The 28-year-old, bidding to join Juan Manuel Fangio as a five-time F1 champion, also confirmed that he had named his new car 'Margarita', continuing his tradition of christening his vehicles with female names.
Last year's car, his first Ferrari, was 'Eva', which succeeded 'Suzie', his last car at Red Bull, where he won four consecutive championships.
"It's not named after pizza, it's a name," he said.
(Editing by John O'Brien)
