Amid Lewis Hamilton’s Monaco struggles, Vettel won in Monaco and now has a 25 point advantage after six races.
“Vettel won because he was faster when Raikkonen stopped,” Lauda, Mercedes’ team chairman, told Sky Italia.
“Do I look happy? Ferrari always has a slice of my heart. They were perfect and we were not.
“The championship? It’s going in the direction of Vettel but there are still many races,” said the F1 legend.
Lauda also told the Austrian newspaper Kronen Zeitung: “On Monday I was still angry, but now we have to find the right tyre window.
“Another thing is clear: Vettel must have a failure, otherwise it is over. Ferrari are in a real flow and if this continues, the gap is enormous,” he said.