It does require manual intervention, and the campaign strategy is typically called "alpha beta" where the beta is a broader match type, with the goal of a lower IS (via budget-- not always AP). As you state, there is in fact more competiton for these terms (for a reason) in efficient markets (both from other manual bidders and automated bidding), but it still works (many times you end up with competitors who hit their budget caps due to their other misaligned spend). In situations where the bids cause CPA to exceed target, you simply choose to lose IS due to bids and shift resources. With automated bidding, you don't always have this option. The key concept that people miss is that automated strategies optimize fill rate for Google-- so you end up with tons of longtail spend that will likely never convert and is hard to identify. Automated strategies will also abstain from auctions if they can't hit specific goals, or will have severely limited volume.

Auctions may vary-- most of my managed spend (mid 8 figures, so not huge) has been in high CPC (think $5-25) verticals like home services, movers, insurance, mortgage and mattresses (insane period from 2015-2018). I have set things up manually, let Google AEs setup the "recommended" bid strategies (and even run longer than their suggested timeframe) and utilized known agencies, and the manual bidding (always accompanied by aggressive negatives, high AP/IS goals) always won by large (30%+ lower CPA with higher volume) amounts. Performance may be drastically different in ecommerce niches where everyone is using automated strategies, as well as other factors like number of auction participants, participant budgets, sophistication and even objectives (executive spite is a valid reason-- hence Google's target outrank share strategy). Anyone who has done PLAs/shopping ads will be incredibly cynical due to their targeting methodology of being all inclusive with the onus of exclusions on the advertiser when the majority of errant spend is in the longtail-- good luck talking to 99% of marketers about tokenization, stemming and lemmatization for identifying negative matching strategies.

So yes, automated bidding can work better than just YOLO'ing some broad match campaigns, but most people shouting their praises, that I have encountered, are parroting their ad rep's talking points. Any competent performance marketer (not many) will be able to outperform automated bidding strategies, but things like scale (why bother saving 20% on 5k spend?), principal/agent problem, or workload (or being lazy, relying on salespeople to do their job) will also have an impact.