Guardiola led the Premier League champions to the quarter-finals last season, almost matching their best ever run in Europe's elite club competition – the semis in 2015-16.
City are considered among the favourites to again challenge in Europe, but Guardiola said clubs with previous success in the Champions League were bigger contenders.
"Our great success as a club was the Champions League semi-final, in all our history," he said on Sunday.
"I don't know whether we are ready, it's the truth, I don't know. We don't have much history behind us, but so much confidence.
"It's not just a matter of coach, players, club and supporters. It's a matter of believing we can and we have to win, and honestly, I don't know whether we have already reached this point.
"There will be a point where [AC] Milan will be back playing in Europe, and they have won, I don't know, five, six, seven times.
"I believe Juventus buying Cristiano [Ronaldo] wanted to show that this year they want to win. They reached the final twice, each time they get closer.
"Atletico Madrid will be playing at home. It's a team that did very well in the last few years. And then some other team will be in, and I hope we can be there too."