South Korea has indicted the chairman of Hyundai Motor on charges of embezzling company funds, according to Reuters.

One immediate affect was the indefinite postponing of construction of the company's plant in the Czech Republic, the news agency noted.

Chung Mong-koo, 68, the head of the country's top automaker, was arrested in late April after a month-long investigation into allegations that Hyundai Motor and its affiliates had created slush funds to offer cash for political favours.

"Chairman Chung Mong-koo has been indicted today," Chae Dong-wook, a senior prosecutor at the Supreme Prosecutors' Office, told Reuters on Tuesday.

Chung is accused of breach of trust and embezzling 103.4 billion won ($US109.2m) in company funds, some for personal use, and for incurring losses at group companies by forcing them to support weaker affiliates, Chae reportedly said during a briefing.

Reuters noted that some analysts are concerned the continued detention of Chung, known for his robust day-to-day management style, could create a leadership vacuum and delay the group's ambitions to become the world's fifth largest automaker by 2010 in terms of sales volume - including affiliate Kia it is now seventh.

Hyundai spokesman Jake Jang told Reuters the firm had indefinitely postponed the construction of a car factory in the Czech Republic, citing the chairman's absence.

"We hope Chairman Chung will return soon to take care of important management issues in the group," he added.

Chung is being held in a detention centre near the capital Seoul to await trial and could not be contacted.

Although the prosecutors' office did not specify the likely schedule for legal proceedings, some legal experts said the process including potential appeals could last about 18 months, Reuters said.

Korean criminal law requires that a first trial be completed within six months of arrest, or the defendant can be allowed to walk free, the report noted.

Chae told Reuters prosecutors also planned to indict Chung Eui-sun, the son of the chairman and president of Kia, along with other Hyundai group executives after further investigation. He was previously questioned about the case, although he was not detained.