Mendy had made an impressive start to life in the Premier League, but his progress was soon stalled after suffering knee ligament damage in the win over Crystal palace last month.
With surgery following and the news that he could be out until April, the Manchester club have stepped up their interest in Martin and sent scouts to watch Espanyol's La Liga clash against Levante on Friday.
The 20-year-old was next on the list if City's summer pursuit of Mendy had failed. Now, Pep Guardiola's side are weighing up a January bid for the Spain U21 international as they seek a left-back capable of living up to the former Monaco man's level.
However, City could face competition from rivals Manchester United, who have also been keeping an eye on the defenders progress.