I copy the entire tree into another project of the same version and the wheels render with a strange collision. I have checked every setting I can find and they are all the same.
It seems more like motion blur is active in the second project, it’s enabled by default. Try to disable it in your project settings. If the visual glitch persists, it might be caused by collision capsule out of place. You can visualize collisions in editor via console command:
showflag.collision 1 (1 to enable and 0 to disable)