It was the second successive defeat to the Premier League champions in four days.
The Blues lost 1-0 to City at Stamford Bridge in the league.
However, away at the Etihad, Potter’s men were battered thanks to goals from Riyad Mahrez (2), Phil Foden and Julian Alvarez.
“It was a cagey first 20 minutes and we couldn’t attack the backline well enough.
“I think Man City do really well in terms of stopping you from doing that. At the same time, we struggled.
“It was a fantastic first goal in terms of a strike from a free-kick, and a strange penalty and you are caught in a position where it is 2-0 and you have to chase the ball against Manchester City. You are caught between trying to commit more men and not getting opened up,” Potter said.
Chelsea’s next fixture will be a London Derby against Fulham in the Premier League on Thursday.