Starting from 13th on the grid, Vettel lasted less than five laps on the Albert Park circuit when he was forced to retire with engine problems.
Vettel's new Red Bull teammate Daniel Ricciardo initially looked to have fared better, qualifying second before finishing behind Nico Rosberg to become the first Australian to take a podium at an F1 Australian Grand Prix.
His celebrations were short lived after he was later disqualified when stewards ruled Red Bull breached F1's new fuel-flow-limit rules during the race. Red Bull has appealed the decision.
Vettel said his new V6 turbo hybrid car lacked power from the start of the race.
"We tried to recover as much as we could. At some stage I thought it was a slight improvement, but obviously we realized there was a bigger problem with the engine," he said. "For some reason we lost a couple of cylinders. When you don't have the power from the engine, you can't make the whole system function properly and you lose even more power."
A switch to six-cylinder turbo engines has forced a radical redesign of all this season's F1 cars, with the aim of making the series more relevant to the car industry and tempting major automakers back to F1.
After winning the last nine races of the 2013 season, preseason testing was problematic for Vettel, and his first race of 2014 disappointing to say the least. But he maintains he is still in contention for a fifth straight driver's title.
"For sure were learned an awful lot (about the car). We learned the car is quick, we just need to get everything together," Vettel said.
"No doubt we'll fix this issue, the question is how soon?"