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Seems kinda shitty to deny him. There is a government calculated mileage rate that should just be the default rate (somewhere around $0.50-$0.60 per mile) since it's supposed to cover gas, maintenance, and every other expense it takes to operate a vehicle on the road.
As an alternative, imagine someone with a vehicle that gets 5MPG asking to be paid more than the set rate. I'm sure management would reject that as well.
It wasn't that they were gonna just stop paying him, they were saying they were gonna do it themselves from now on so they didn't have to lose that money (our store is in a pretty rough spot)