If an attempt is made to deploy EDGE using same TEP VLAN for ESXi and EDGE, then the TEP will not be functional. The tunnel status will not be up.
'NSX on DVPG' property is disabled at Cluster Level. In order to use same TEP VLAN for ESXi and EDGE, this property needs to be enabled on the Cluster where the EDGE is getting deployed.
"NSX on DVPG" can be enabled for the Cluster (Where EDGE is deployed) from NSX in one of the following cases:
If NSX is singleton deployment and the Edges are getting deployed on the same Cluster where VC is deployed, then they have to scale out the singleton NSX to three node cluster and then enable "NSX on DVPG" for that Cluster from NSX.
Alternative solution is to use different TEP VLANs for ESXi and EDGE.