So, I was practicing TLOC extension at my SD-WAN lab on EVE-NG and I spent around 4 hour to troubleshoot this strange issue. The issue is directly connected subinterface cannot ping each other. They are both connected to GigabitEthernet4 physical interface on EVE-NG. 



I have included the issue in the picture for clarification with bit of show command.
According to my troubleshooting, there is some issue with ARP for the subinterface. The subinterface is GigabitEthernet4. I tried to emulate the problem on fresh IOS-XE Edge device on EVE-NG without templates attached or should I say not deployed to SD-WAN Fabric but they are IOS-XE SD-WAN image in Controller-managed mode. To my surprise, it worked there even on subinterface. If anyone had similar issue, any help will be appreciated and this post might help others who may face similar issue.