The Premier League champions currently sit 12th in the table after six games following a 2-1 defeat to West Bromwich Albion at Old Trafford on Saturday that has resulted in them receiving mass criticism.
Despite being eight points behind leaders Arsenal, Neville believes that United can still defend their crown and will be focused on beating Shakhtar Donetsk in Europe this week.
"People are saying Manchester City can win the title and they're only three points in front of Manchester United so I think they can," Neville told Sky Sports News. "Obviously at the moment there's an inquest into everything and when the mud's flying around some of it is going to stick. At the moment they just have to work their way out of it.
"I said at the start of the season that the players are going to have their biggest challenge ever: can they play without Sir Alex Ferguson?
"It's not just David Moyes by the way; there's players in there who are incredibly experienced and determined. They'll be the ones that are hurting, I'm sure. They'll be at home thinking about the game against Shakhtar and wanting to put it right."
United travel to Ukraine to face Shakhtar in the Champions League on Wednesday.