It's totally ludicrous.
I don't smoke but some of my employees do. They can't smoke in company car during work hours, even if they are on their own.
Just think for one second...
1) If the car has to be given to someone else because they leave etc why should they have to drive something that smells like an ash tray.
2) If the cars are contract hire from a leasing company....what happens when they go to dispose of it after 3years/60k miles.....oh yeah the value takes a hit because its a stinking ash tray!