Bernardo Silva pulled a goal back in an improved second-half performance, but couldn't prevent City slumping to their first defeat of the season.
"We started a little bit slow and lost many duels", said Arteta, who can not have enjoyed his first audition as one of the potential candidates eventually to replace Guardiola as City manager. We conceded many counter-attacks and at this level you get punished.
City, who are favourites to win this season's competition with some bookmakers, fell further behind before half-time - Lyon captain Fekir finding the net from 25 yards after Fernandinho gave the ball away inside his own half. "But we picked ourselves up and we came out second half fighting and played a better second half".
Guardiola has been trying to guard against complacency but Arteta insisted his side were fully aware of how risky Lyon were, despite their poor start to the season, which has seen them win two and lose two of their five opening Ligue 1 games.
"The end of the game was tougher as they brought it back to 2-1 and brought on talented players".
"I wouldn't like to make excuse", Arteta said. If Pep had been on the touchline I can't tell you whether we would have won 5-0 or lost 0-3.
Whether Guardiola's absence from the dugout was behind City's ragged first-half display is hard to ascertain, but the team produced their worst performance for months while he was not standing in his technical area.
Diogo Dalot Starts - Manchester United Team vs Young Boys Confirmed
Captain Antonio Valencia will not play for Manchester United due to the artificial turf at the Stade de Suisse. Marcus Rashford is line to start, meanwhile, with the striker set to accompany Romelu Lukaku in attack.
The Champioooooooons! The Champions League made a glorious return with some ripsnorting matches last night and we're back with some potential classics this evening.
With Group F rivals Shakhtar Donetsk and Hoffenheim drawing 2-2 in Ukraine earlier on Wednesday, City are bottom of the group.
City's Brazil midfielder Fernandinho coughed up possession in the build-up to Lyon's first goal, and then did exactly the same under pressure from Fekir for their second.
"The ideal scenario is to have a full stadium every time and being behind the team like insane but we know sometimes it doesn't happen".
"I don't think [it was a problem], we worked the last two days, focusing with him", he said.
The Champions League anthem was again booed by the crowd - reflecting to ongoing bitterness over UEFA sanctioning the club for breaching spending rules - and the team often fails to sell out group-stage games.