Sergio Aguero scored all three goals for the visitors, with the third coming from the penalty spot after Thibaut Courtois had been sent off for bringing down Fernandinho.
Chelsea are set for a managerial switch at the end of the season as Italy head coach Antonio Conte will take charge after Euro 2016, but Souness thinks more changes are needed.
“There is a nucleus of a very good team there,” he said on SNF. “But for them to get anywhere near the big trophies like the Premier League and Champions League, there has to be several new faces.
“It was a team with something to play for against a team going through the motions. Some of Chelsea’s play was bordering on a disgrace.
“It was a good game for City, off the back of a really good win and qualifying for the semi-finals of the Champions League. They have their tails up, but they met a Chelsea team with players who you would expect to be at it – and they weren’t.
“The ones that have been good in the past have to step up to the mark again. Diego Costa went through the motions today, Eden Hazard, the Player of the Year last year, is coming back, and I don’t understand why (Nemanja) Matic doesn’t play in the more difficult games. He was missed greatly today.
“That combination of (Jon Obi) Mikel and (Cesc) Fabregas got overrun. They didn’t take part in the game and that was the biggest problem for me; that area in front of the centre-backs was vacant all the time.”
The defeat leaves Chelsea 10th in the table, 33 points worse off than they were at this stage last season when they won the title under Jose Mourinho.
It is stunning how bad Chelsea have been this season. You can blame it on the preseason, or point fingers at Mourinho, but the defending Premier League champions went through the motions against Man City, and not for the first time this season.
It’s a big task that Conte has ahead of him, as this Chelsea squad looks like it needs a clear out, especially at the back where they were unable to cope with City’s pace and movement on Saturday.
Is Graeme Souness right about Chelsea’s performance?