Preheat oven to 350 degrees. Lightly grease a medium baking dish.
In a bowl, mix beef, egg, oats, evaporated milk, salt, pepper, garlic powder, chili powder, and 1/2 cup onion. Form into 1 1/2 inch balls and arrange in a single layer in the baking dish.
Sauce
In a separate bowl, mix ketchup, garlic, sugar, 1/4 cup onion, and liquid smoke. Pour evenly over the meatballs.
Bake uncovered 1 hour in the preheated oven, until the minimum internal temperature of a meatball reaches 160 degrees F.