What wall cladding should be used along the floor of the garage?
I would use cement board. Since it comes 3x5 feet typically I'd use it for at least the bottom 3 feet, unless doing a larger area (or using a scrap you already have on hand) where I might cut it in half and just come up 18 inches from the floor. It takes both water and the sort of minor impacts common in garages with tools far better than drywall does.