Plywood, not drywall, for moisture resistance and durability.
We tend to have humid summers and pretty large seasonal temperature swings. It's been my experience that drywall doesn't like that. Damp drywall is bad, and large temperature swings lead to cracks in drywall mud.
Plywood is also much more resistant to taking a beating. This is a garage. I'll be working on projects and moving heavy equipment around. Drywall is sure to get pretty banged-up.
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