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The Blues laboured in the opening period, conceded twice and were left chasing the game in the second half to ultimately record a fourth successive Champions League loss.
“It could have been better,” said Arteta, standing in for Pep Guardiola who is serving a touchline ban.
“We started slowly, and we were inconsistent in the way we wanted to play.
“We lost too many duels. We gave the ball away in difficult circumstances and they scored twice, but after that, the reaction from the lads was superb.
“We tweaked a few things to control situations better and we created chances, but at this level, it wasn’t enough.”
Asked if he felt Pep’s absence affected the players, Arteta replied: “I have no idea. The reality is Pep wasn’t here and we lost the game. I can’t tell you what would happen if he was here.
“We were very aware of Lyon’s strengths and weaknesses. We were well prepared.
“We weren’t prepared to be 2-0 down at the break, but you have to react.
“There is zero margin for errors in the Champions League – you make a mistake and you are punished. If you don’t win duels, play simple balls, you will suffer - today was another example of that.
“Sometimes a new competition you have to get on track. The start wasn’t good. We didn’t feel the flow around the team.
“We missed the right pass and didn’t find consistency. We felt under threat every time we lost the ball, that can bring the confidence lower.
"We were ready for the game, keen to start to Champions League because the way we ended it last season really hurt.
“The players are not perfect, sometimes they have bad days, sometimes better. I can’t fault the effort. I won’t judge them because we lost.”
Manchester City v Lyon: Team news and tactics
All the major talking points ahead of Wednesday's Champions League opener