Although City set a new Premier League points record, they were knocked out at the quarter-finals of the European competition by Liverpool last term.
Still, even more is expected of City heading into the new campaign, and Sane is confident they can impress on the continental stage.
“I think step by step we’re getting closer," he told ESPN when asked if the Champions League is their top priority in 208-19.
"It’s still hard that we couldn’t achieve more than we did last season. Like always this will be our target to be better in this competition.“
But the 22-year-old winger admits his side will find it difficult to improve on such a dominant season which saw them win the Premier League and EFL Cup.
"It’s really hard because you see the other teams and everyone is trying to get better to win the season," he said. "The big teams and even the smaller teams too. Everyone’s trying to get better and work harder to stop us too and the way we play, our tactics. We have to work hard to get more perfect in some situations."
Sane was left out of the Germany squad by coach Joachim Low for the 2018 World Cup and has returned from the summer break to find more competition for his place at City in the shape of Mahrez.
However, he is happy to fight for a starting spot after impressing with 10 goals and 15 assists in the league last season.
"Yes I’m totally happy for [the competition]. I like competition especially because he’s a really good person," he added.
"He’s really nice, open, and a really class player. I think everyone’s seen it before in Leicester that’s why I’m really happy that he’s here."
Guardiola's men face Chelsea in the Community Shield on Sunday before their first Premier League game against Arsenal on August 12.