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The big problem Apple must fix before it launches a car

Apple car an enormous capital commit: Lutz

Before Apple can even consider rolling out an iCar, it still has one major problem to fix: Apple Maps.

The company from Cupertino, California, has struggled to catch up to Google in the mapping space. But if the iPhone maker is serious about building its own vehicle, and owning both the software and hardware side of it, then improving its maps is critical.

"Thank God the Apple Car is not launching today because that would be a major issue," said Gene Munster, technology analyst at Piper Jaffray. "Let me put it this way, if they don't fix maps, the car is not going to launch. They need it. But I think they will fix it, it's that big of a problem."

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While the tech giant made its first big entrance when it launched CarPlay, it's likely that its ultimate vision is much larger than integrating its software into the car experience, Munster said. His price target is $160 and his stock rating is overweight.

Maps not ready yet

Simon Dawson | Bloomberg | Getty Images

"Everything we have ever talked to Apple about, they have wanted to build both the hardware and software. If they want to be true to that mantra, then they are going to do the whole car," he said. "It makes perfect sense, it's an industry that hasn't really changed in a hundred years."

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According to a Bloomberg report on Thursday the company may want to roll out an electric car as soon as 2020. But before it can transform the car into the next iPhone, it needs to make sure it can get people from point A to point B, industry experts said.

Apple's Maps system was heavily criticized after its launch in 2012 because of glitches and inaccuracies. CEO Tim Cook even issued a statement on the company's website apologizing to users for how bad the service was. Since then the company has made investments to improve its mapping system.

For example, in October the company launched its Apple Maps Connect program, which let local businesses create and add details to listings to make information more accurate.

But the company still has a ways to go, said Bob O'Donnell, founder and chief analyst of TECHnalysis Research.

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"The level of expectations people have around maps now is very high. It is an essential part of any device these days. Mobile devices need good mapping, and any car needs high quality mapping," he said.

Unlike Munster, O'Donnell doesn't see Apple building a car from the ground up just yet. Instead he sees Apple building electronic parts for the automobile. The need for them to keep improving their maps service is indisputable because they need accurate location data to support all kinds of other services, O'Donnell said.

"Mapping is also a gateway to location-based services, which is very, very important. It's a core data set that you got to have, and you want to have it built in your own particular way, and the only way you are going to do that is by having your mapping data because then you could build your own ecosystem around that mapping data," he said.

In other words, good mapping data helps Apple keep application developers who build location-based services on its platform and gives it the ability to control how people interact with that data.

Maps aren't the only challenge the iPhone maker will face as it looks to enter the auto space in a big way.

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More hurdles before an iCar

For one thing, the previously reported five-year time horizon is really optimistic, industry experts said.

"Getting a car into production by 2020 and building out a reliable supply chain in that shortened design period will be tough. Far more challenging than sourcing parts and shipping iPhones and iPads around the globe," said Lou Basenese, founder of Disruptive Tech Research.

Unlike Apple's iPhone production, the company cannot outsource car manufacturing to FoxConn, Munster said. First they would have to either make an acquisition of a car company or buy their own manufacturing plant, he said.

Like Tesla, Apple could also face strong opposition from the traditional dealer networks. Tesla has become a target for its showrooms, which enable people to order customized Model S electric vehicles directly from the factory.

Multiple states have taken legal action banning the company from establishing these showrooms because they say direct retailing of the cars is a violation of state automotive franchise rules. If Apple goes this route, it may experience the same kind of setback, Munster said.

"If you are in the car business, you have to create car dealers and then you have to figure out how to create the cars and then you have to be backlogged with car parts for 10 years because people keep their cars for 10 years. And so there are many other elements to cars that are so far beyond what Apple has ever done. I think there are a lot of challenges," O'Donnell said.

"It's not that they couldn't do it. They have got enough money to do anything. But is that the most effective use of their money? The most effective way to expand? And nobody knows."