Q:

Installing gems fails in deployment - AWS Elastic Beanstalk

The native gems are not installing while I try to deploy the app in AWS Elastic Beanstalk(EB) environment. 
eb-activity.log
  Don't run Bundler as root.  Bundler can ask for sudo if it is needed, and
  installing your bundle as root will break this application for all non-root
  users on this machine. 
  Warning: the running version of Bundler is older than the version that created the lockfile.  We suggest you upgrade to the latest version of Bundler by running `gem install bundler`. 
  fatal: Not a git repository (or any of the parent directories): .git
  fatal: Not a git repository (or any of the parent directories): .git
  Fetching gem metadata from https://rubygems.org/
  Fetching version metadata from https://rubygems.org/
  Fetching dependency metadata from https://rubygems.org/
  Resolving dependencies...
  Installing rake 11.2.2
  Installing i18n 0.7.0
  Using json 1.8.3
  Installing minitest 5.9.0
  Installing thread_safe 0.3.5
  Installing builder 3.2.2
  Installing erubis 2.7.0
  Installing mini_portile2 2.1.0
  Installing pkg-config 1.1.7
  Installing rack 1.6.4
  Installing mime-types-data 3.2016.0521
  Installing arel 6.0.3
  Installing jmespath 1.3.1
  Installing bcrypt 3.1.11 with native extensions

  Gem::Ext::BuildError: ERROR: Failed to build gem native extension. 

      current directory: /var/app/ondeck/gems/bundle/gems/bcrypt-3.1.11/ext/mri
  /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-19gpiil.rb extconf.rb
  Cannot allocate memory - /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-19gpiil.rb extconf.rb 2>&1

  Gem files will remain installed in /var/app/ondeck/gems/bundle/gems/bcrypt-3.1.11 for inspection. 
  Results logged to /var/app/ondeck/gems/bundle/extensions/x86_64-linux/2.3.0-static/bcrypt-3.1.11/gem_make.out
  Using bundler 1.12.1
  Installing rubyzip 1.2.0
  Installing coderay 1.1.1
  Installing coffee-script-source 1.10.0
  Installing execjs 2.7.0
  Installing thor 0.18.1
  Installing concurrent-ruby 1.0.2
  Installing orm_adapter 0.5.0
  Installing unf_ext 0.0.7.2 with native extensions

  Gem::Ext::BuildError: ERROR: Failed to build gem native extension. 

      current directory: /var/app/ondeck/gems/bundle/gems/unf_ext-0.0.7.2/ext/unf_ext
  /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-1kl25wy.rb extconf.rb
  Cannot allocate memory - /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-1kl25wy.rb extconf.rb 2>&1

  Gem files will remain installed in /var/app/ondeck/gems/bundle/gems/unf_ext-0.0.7.2 for inspection. 
  Results logged to /var/app/ondeck/gems/bundle/extensions/x86_64-linux/2.3.0-static/unf_ext-0.0.7.2/gem_make.out
  Installing hashie 3.4.4
  Installing htmlentities 4.3.4
  Installing multi_xml 0.5.5
  Installing multi_json 1.12.1
  Installing jwt 1.5.4
  Installing method_source 0.8.2
  Installing mimemagic 0.3.0
  Installing mqtt 0.4.0
  Installing netrc 0.11.0
  Installing pg 0.18.4 with native extensions

  Gem::Ext::BuildError: ERROR: Failed to build gem native extension. 

      current directory: /var/app/ondeck/gems/bundle/gems/pg-0.18.4/ext
  /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-4s0qe7.rb extconf.rb
  Cannot allocate memory - /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-4s0qe7.rb extconf.rb 2>&1

  Gem files will remain installed in /var/app/ondeck/gems/bundle/gems/pg-0.18.4 for inspection. 
  Results logged to /var/app/ondeck/gems/bundle/extensions/x86_64-linux/2.3.0-static/pg-0.18.4/gem_make.out
  Installing slop 3.6.0
  Installing rack-cors 0.4.0
  Installing sass 3.4.22
  Installing tilt 2.0.5
  Installing turbolinks-source 5.0.0
  Installing will_paginate 3.1.0
  Installing apipie-rails 0.3.6
  Installing rdoc 4.2.2
  Installing tzinfo 1.2.2
  Installing nokogiri 1.6.8 with native extensions

  Gem::Ext::BuildError: ERROR: Failed to build gem native extension. 

      current directory: /var/app/ondeck/gems/bundle/gems/nokogiri-1.6.8/ext/nokogiri
  /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-13djrm9.rb extconf.rb
  Cannot allocate memory - /opt/rubies/ruby-2.3.1/bin/ruby -r ./siteconf20160916-26394-13djrm9.rb extconf.rb 2>&1

  Gem files will remain installed in /var/app/ondeck/gems/bundle/gems/nokogiri-1.6.8 for inspection. 
  Results logged to /var/app/ondeck/gems/bundle/extensions/x86_64-linux/2.3.0-static/nokogiri-1.6.8/gem_make.out
  Installing rack-test 0.6.3
  Installing warden 1.2.6
  Installing mime-types 3.1
  Installing aws-sdk-core 2.6.1
  An error occurred while installing bcrypt (3.1.11), and Bundler cannot continue. 
  Make sure that `gem install bcrypt -v '3.1.11'` succeeds before bundling. ( Executor::NonZeroExitStatus)

I tried the following:

updating bundler using gem update bundler command in EB /var/app/current directory and the is no improvements.  
Removing gemfile.lock and bundle install in local and deployed updated gemfile.lock. 

The same above error occurs everytime. 
I am using Rails 4.2.4 with ruby 2.3 version. 
Please help me.  Thanks. 

A:

I finally solved the issue by caching the gem. 
I ran bundle package in local and it creates the gem caches in the vendor/cache directory. 
Now, while deploying in AWS with those cached gems it tries to use the cached gem instead of installing it.  I don't know whether it is a good practice but, it solved my issue. 
I got this solution from the AWS blog: Locally Packaging Gem Dependencies for Ruby Applications in Elastic Beanstalk
Edit #1: Adding @sybind's comment in answer
bundle package --all will include all :git references
If there is any better solution please let me know.