Because some PE routers might receive routing information they do not require, a basic requirement is to be able to filter the MP-iBGP updates at the ingress to the PE router so that the router does not need to keep this information in memory.
The Automatic Route Filteringfeature fulfills this filtering requirement. This feature is available by default on all PE routers, and no additional configuration is necessary to enable it. Its function is to filter automatically VPN-IPv4 routes that contain a route target extended community that does not match any of the PE's configured VRFs. This effectively discards any unwanted VPN-IPv4 routes silently, thus reducing the amount of information that the PE has to store in memory -> Answer 'PE1 will reject the route due to automatic route filtering' is correct.