Now at Ferrari, Vettel is struggling in his championship battle against Lewis Hamilton, with the deficit blowing out to a full 40 points in Singapore.
“Sebastian works incredibly hard and hardly anyone is more self critical than he is,” Newey told Bild am Sonntag newspaper.
“If he has a weakness, it’s that he can make stupid mistakes in the heat of the moment. If he leads he is almost unbeatable.
“But people deal with pressure differently. In the car, he is responsible not only for himself, but for the entire team.
“Some drivers are not bothered, like the Finns. But there are others who really feel the pressure weigh on them at the end of a world championship.
“The harder a driver works, the more he feels the pressure. That’s particularly true of Seb,” Newey added.
The Red Bull chief explained that although Hamilton made mistakes earlier in his career, the Mercedes driver has now “found a way that makes him better with the pressure”.
Newey admits that it could be too late for Vettel to win the 2018 title now.
“If he’s going to manage it, he needs at least one retirement from Lewis. Otherwise it’s going to be damn hard,” he said.
As for Red Bull’s preparations for a more serious championship challenge next year, Newey said he is working hard on the chassis that will be Honda-powered.
“We have some aerodynamic rule changes that, in my view, have been introduced somewhat precipitously,” said the Briton.
“I’m afraid that it will make overtaking even less likely and that qualifying lap times will be even further apart,” Newey added.
However, he said he is determined to keep working in F1 for now.
“If you had asked me ten years ago, I would have said ‘five more years’. Five years ago I would have said the same. But I’m not ready to quit yet,” said Newey.