Figured out where I actually need to add code, and added code there.

Source/Engine/Tools/ModelTool/ModelTool.OpenFBX.cpp

@@ -207,7 +207,7 @@ struct OpenFbxImporterData
         return false;
     }
 
-    int32 AddMaterial(ImportedModelData& result, const ofbx::Material* mat, const Material* instanceOf)
+    int32 AddMaterial(ImportedModelData& result, const ofbx::Material* mat)
     {
         int32 index = Materials.Find(mat);
         if (index == -1)
@@ -542,6 +542,7 @@ bool ProcessMesh(ImportedModelData& result, OpenFbxImporterData& data, const ofb
         else
             aMaterial = aMesh->getMaterial(0);
     }
+
     mesh.MaterialSlotIndex = data.AddMaterial(result, aMaterial);
 
     // Vertex positions

Source/Engine/Tools/ModelTool/ModelTool.cpp

@@ -30,6 +30,7 @@
 #include "Engine/Tools/TextureTool/TextureTool.h"
 #include "Engine/ContentImporters/AssetsImportingManager.h"
 #include "Engine/ContentImporters/CreateMaterial.h"
+#include "Engine/ContentImporters/CreateMaterialInstance.h"
 #include "Engine/ContentImporters/CreateCollisionData.h"
 #include "Editor/Utilities/EditorUtilities.h"
 #include <ThirdParty/meshoptimizer/meshoptimizer.h>
@@ -862,6 +863,38 @@ bool ModelTool::ImportModel(const String& path, ModelData& meshData, Options& op
         importedFileNames.Add(filename);
 #if COMPILE_WITH_ASSETS_IMPORTER
         auto assetPath = autoImportOutput / filename + ASSET_FILES_EXTENSION_WITH_DOT;
+        if (options.ImportMaterialsAsInstances) {
+            LOG(Warning, "Did work poggers");
+            if (AssetsImportingManager::Create(AssetsImportingManager::CreateMaterialInstanceTag, assetPath, material.AssetID))
+            {
+                LOG(Error, "Failed to create material instance.");
+                return true;
+            }
+            else
+            {
+                MaterialInstance* materialInstance = (MaterialInstance*) LoadAsset(material.AssetID, ScriptingTypeHandle());
+                if (materialInstance == nullptr)
+                {
+                    LOG(Error, "Failed to find created material instance.");
+                    return true;
+                }
+
+                MaterialBase *materialInstanceOf = (MaterialBase*) LoadAsset(options.InstanceToImportAs, ScriptingTypeHandle());
+                if (materialInstanceOf == nullptr)
+                {
+                    LOG(Error, "Failed to find the material to create an instance of.");
+                    return true;
+                }
+
+                materialInstance->SetBaseMaterial(materialInstanceOf);
+                if (materialInstance->Save())
+                {
+                    LOG(Error, "Failed to save the material instance.");
+                    return true;
+                }
+            }
+        }
+        else {
             CreateMaterial::Options materialOptions;
             materialOptions.Diffuse.Color = material.Diffuse.Color;
             if (material.Diffuse.TextureIndex != -1)
@@ -880,6 +913,7 @@ bool ModelTool::ImportModel(const String& path, ModelData& meshData, Options& op
             if (!Math::IsOne(material.Opacity.Value) || material.Opacity.TextureIndex != -1)
                 materialOptions.Info.BlendMode = MaterialBlendMode::Transparent;
             AssetsImportingManager::Create(AssetsImportingManager::CreateMaterialTag, assetPath, material.AssetID, &materialOptions);
+        }
 #endif
     }
 

Source/ThirdParty/OpenFBX/ofbx.h

@@ -1,4 +1,5 @@
 #pragma once
+#include <Engine/Core/Types/Guid.h>
 
 
 namespace ofbx