A Better Auto Crossbow - Hammerhead

First Available: Chapter 3
Other Requirements: Obtain Auto Crossbow Item
Location: Hammerhead
Rewards: 2,000 EXP & Auto Crossbow Plus

You're able to accept this quest after obtaining the Auto Crossbow item from Keycatrich Trench, a dungeon you visit during the second chapter of the game's story. This item spawns as a collectible on the ground somewhere in the dungeon for players to collect.

In order to upgrade the Auto Crossbow you'll need to collect a Cactuar Needle which is a very difficult item to get. As you can surmise from the name, it drops only off Cactuar enemies which are very rare enemies and only appear in certain areas.

Cactuar Needle Locations

1. South of Vesperpool. Treasure Spot on the map (Screenshot below)
2. Timed Event in Leide (mentioned below). Only available on the 1st of each month
3. Area south of Cauthess Rest Area; cactuars can usually be summoned with the Beast Whistle

Vesperpool Cactuar Needle Map Location.

As far as the locations that you can find Cactuar and Slactuar enemies to farm; Cactuars can easily be found at the Timed Event which I talk about below in Leide. If you'd like to learn more about Timed Events and where to find the ones available each day I recommend you check out the FFXV Wikia for Timed Quests.

Cactuar Timed Event in Leide